« Follow Up With Abe! | Home | US Earnings On Tap! »
O Canada!
By Mike Conlon | July 9, 2010
This morning, Canadian employment figures came in and showed a drop in the unemployment rate from 8.1% to 7.9% on strong jobs growth. The Canadian economy added 93K jobs vs. an expectation of 20K. This belies the good economic story going on in Canada despite the fact that they rely on the US to import their goods and services. Should the US economy slow down, it could affect Canadian GDP negatively.
In the European session, ECB President Trichet made the “we’re not out of the woods yet” comment, saying that there is still question over the health of the EU banking system and that serious changes need to be implemented to get better control over the deficits. The bank stress tests are due in about two weeks.
In the UK, PPI figures came in lower than expected, showing signs that the BOE may be correct in their assessment that inflation would be subside. The minutes from the rate policy meeting will be released on July 21st, and is expected to show a continued dovish stance.
Lastly, we’re seeing Dollar strength this morning despite the fact that risk-aversion is mild. This is probably more of a technical bounce and the function of traders not wanting to hold risk assets over the weekend. US stock earnings season kicks off on Monday.
In the forex market:
Aussie (AUD): The Aussie is lower this morning after posting its best week of gains in nearly 9 months. Bets that a further rate hike in 2010 have increased as a result of the best surge in employment they have seen in nearly 4 years.
Kiwi (NZD): The Kiwi is also lower, trading in sympathy with the Aussie.
Loonie (CAD): The Loonie is the best performer this morning as employment gains bested analyst expectations by a wide margin. There is a good growth story going on in Canada, as they benefit from commodity gains and as long as their largest trading partner to the south (US) keeps spending. In addition, housing starts came in largely in line with expectations.
Euro (EUR): The Euro is lower this morning as the market prepares for the bank stress tests. There is much speculation in the market about what the results will be, and what measures will need to be taken to insure financial health. One such solution would be that the banks may need to raise additional capital. German CPI figures came in as expected, showing signs of some price stability. There are also rumors floating about that the ECB may need to take a more dovish stance with the Euro, which could mean increased quantitative easing or possible rate cuts, though the latter seems unlikely at this point.
Pound (GBP): The Pound is lower as well, as PPI figures fell for the first time in nearly 2 years, easing inflation pressures in the economy. The UK had been seeing inflation outside of government targets, but it appears that it may be coming back to their preferred range. In addition, the UK trade deficit widened as a .2% gain in exports was negated by a 2.4% gain in imports.
Dollar (USD): The Dollar is higher against all but the Loonie, as the market moves toward the safe haven of the Dollar going into the weekend. In addition, the Dollar has been beaten up this week as risk-taking has been the primary driver. Reports are coming out that economists are paring back their expectations for growth in US, but see no signs of the dreaded double dip at this point despite the recent patch of negative economic news. US earnings season also kicks off on Monday, so this could be adding to market fears should corporate profits be down.
Yen (JPY): The Yen is starting out lower this morning, as the Nikkei was able to hold on to gains in the overnight session. There is some mild risk-aversion in the market today, and the Yen is higher than the European currencies.
So today is a bit of a mixed bag. Neither risk-taking nor risk-aversion can be seen as a dominant theme. Good news out of Canada has put the focus back on the N. American currencies, with the European ones lagging.
US corporate earnings will be the big story next week, and if those reports are positive, it could buoy market sentiment higher. While the stock market health does not equal overall economic health, it will act as a good economic barometer and could provide hope that the employment picture may be about to get better.
If those earnings reports are largely negative, then that may open a whole new can of worms as the market is already aware of the general state of the economy. In addition, if Washington DC policies continue to threaten business, then it could be a long time before companies begin to hire employees again, if they are reporting good gains.
Either way, there is still risk in the market. If we can successfully get through next week, the European bank stress tests will pose the next major threat.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, AUD, Aussie, bank, BOE, cad, canada, commodity, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, ECB, economic, economy, EUR, Euro, Europe, fear, financial, forex, forex market, free, fx, fxedu, gbp, Il, jpy, Kiwi, live, loonie, lower, market, meeting, Mike Conlon, minutes, news, nzd, pound, practice, practice account, rate, rate cut, release, RSI, sentiment, ssi, stock, technical, time, trade, trader, Trichet, unemployment, USD, Yen
Topics: What To Look At In The Market |