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Dollar moves back higher vs. other majors


The dollar moved back higher against the other majors currencies on Friday, as investors continued to digest the European Central Bank’s latest policy move and eyed the release of U.S. consumer sentiment data due later in the day.

EUR/USD dropped 0.50% to 1.063, the lowest since December 5, still affected by the ECB’s decision at its monthly policy meeting on Thursday to extend its asset purchase program for an additional nine months.

Beyond the program’s scheduled end in March 2017, the central bank said net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary.

In addition, the ECB left its benchmark interest rate unchanged at a record-low of zero, in line with forecasts.

Meanwhile, the dollar also found support after the U.S. Labor Department said on Thursday that initial jobless claims fell by 10,000 to 258,000 in the week ending December 2, in line with expectations.

Sentiment on the greenback became more fragile however ahead of the Fed’s policy meeting next week, amid sustained expectations for a rate hike.

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US Wholesale inventories for October (final) -0.4% vs -0.4% est.


The preliminary report came in at -0.4%

The US wholesale inventories for October came in at -0.4%.
  • October inventories of durable goods were down 0.3 percent (+/-0.4%)* from last month and were down 2.2 percent (+/-1.4%) from a year ago. 
  • Inventories of metals and minerals, except petroleum were down 1.0 percent from last month, 
  • furniture and home furnishings were up 1.6 percent. 
  • Inventories of nondurable goods were down 0.4 percent (+/-0.7%)* from September, but were up 2.5 percent (+/-2.1%) from last October.
  • Inventories of drugs and druggists' sundries were down 3.2 percent from last month, 
  • inventories of petroleum and petroleum products were up 1.9 percent.

Wholesale trade sales higher at 1.4% vs +0.7% estimate. The prior month was revised to +0.4% from +0.2%. 

  • October sales of durable goods were up 1.1 percent (+/-0.7%) from last month and were up 2.5 percent (+/-1.4%) from a year ago.  
  • Sales of electrical and electronic goods were up 2.2 percent from last month 
  • sales of metals and minerals, except petroleum were up 2.0 percent. 
  • Sales of nondurable goods were up 1.6 percent (+/-0.9%) from September and were up 1.9 percent (+/-1.4%) from last October. 
  • Sales of farm product raw materials were up 8.3 percent from last month 
  • sales of petroleum and petroleum products were up 6.6 percent.

The Inventory to sales ratio was 1.3 months vs 1.33 months in the September reading.  That ratio is the lowest since early 2015. 
 

December 2016 Michigan consumer sentiment flash 98.0 vs 94.5 exp


Details from the flash December 2016 Michigan consumer sentiment survey report 9 December 2016

  • Prior 93.8
  • Current conditions 112.1 vs 108.5 exp. Prior 107.3
  • Expectations 88.9 vs 87.0 exp. Prior 85.2

 

USD/CAD Weekly Forecast December 12-16


The Loonie was the top performer last week and the only currency to post gains against the Greenback, resulting in a second consecutive week of decline. The currency pair is faced with critical support at the start of the upcoming week, but developments in the commodity market suggest there will be little support for the exchange rate in the early week.

An agreement was made on Saturday to limit oil output among non-OPEC oil producers. Following the OPEC agreement on November 30 where it was agreed that OPEC producers would make a combined 1.2 million barrels per day cut, the deal on Saturday will result in a combined reduction of nearly 2% of the global oil supply.

There is some skepticism surrounding recent negotiations as seasonality patterns would have contributed towards a decline regardless, and it remains to be seen how big of an impact the recent deals will have towards stabilizing the oil market. Nevertheless, there is some expectation for gains in oil prices in the early week, likely to cause an inversely correlated move in the USD/CAD exchange rate.

The Bank of Canada left interest rates unchanged in the past week. The central bank expects a slowdown in growth in the current quarter after a strong rebound in Q3. There was an improvement in CPI inflation as a drag from gasoline and telecommunications dissipated. The earlier drop in the exchange rate had been boosting inflation, but it is expected that the impact will lessen over time.

The ECB meeting in the past week was the highlight in terms of market moving economic risk events. The central bank extended its bond purchase program to December 2017 from the prior expiry in March, albeit at a reduced pace. The Dollar surged following the announcement resulting in a marginal close above prior weekly highs in the trade-weighted index (DXY).

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US Monthly budget -136.7B vs -130.0B estimate


Prior month revised to -64.5B vs -44.2B

  • US November budget deficit at 136.7 billion versus deficit of 64.5 billion last year
  • Receipts fell 2.5% year on year to 199.9 billion in November
  • Outlays rose 24.9% year on year to 336.5 billion
  • Year-to-date deficit at 180.8 billion versus 201.1 billion last year
  • As of November, year-to-date receipts were up 1.3%. Outlays fell -2.4%
  • The U.S. Treasury received 3.7 billion last month  and 13.5 billion year to date in deposits of earnings  by Federal Reserve banks.
 

November 2016 US NFIB small business optimism index 98.4 vs 96.7 exp


November 2016 US NFIB small business optimism index 13 December 2016

  • Prior 94.9
 

November 2016 US import prices -0.3% vs -0.4% exp m/m


Details from the November 2016 US Import export price data report 13 December 2016

  • Prior 0.5%
 

US MBA mortgage applications w-e 9 Dec -4.0% vs -0.7% prev


Weekly US MBA mortgage report 14 Dec

  • 30 yr mortg rate 4.28% vs 4.275 prev
  • purchase index 226.7 vs 234.5
  • morg market index 397.5 vs 414.1
  • mrtg refinance index 1407 vs 1459
 

US October business inventories -0.2% vs -0.1%


Prior month 0.0% vs +0.1% previously.

The US business inventories  for the month of October came in weaker than expected at -0.2% vs -0.1% estimate.  The prior month was also revised  lower to 0.0% from +0.1%. That should be a negative for Q4 GDP estimates. 
 

The Federal Reserve is making changes to its Beige Book


The first Beige Book in the new format will be released on January 18, 2017


  • The Beige Book characterizes regional economic conditions and prospects across the 12 Federal Reserve Bank Districts based upon a variety of information gathered from businesses and community organizations in each District. Its qualitative nature creates an opportunity to identify dynamics and emerging trends in the economy that may not be readily apparent in available economic data. The Beige Book is generally released on the Wednesday two weeks prior to each Federal Open Market Committee meeting.
Here is the Fed on what the changes will be:
  • The modifications will standardize specific core topics included in each of the 12 Federal Reserve Bank District reports, provide a more consistent presentation of the national summary, and enhance the design of the publication.
  • The national summary, along with each District report, will consistently cover three core topics: overall economic activity, employment and wages, and prices.
  • Each District report will continue to include other topics or industry-specific reports of particular interest in that District.
  • Additionally, the national summary will include highlights from each District.
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