Forex Investment and Currency Trading

CAD
We saw a fairly wide range overnight in USDCAD, as stops were cleaned out on either side of the market in both Asia and London. After the G20 summit provided little for the market to digest, stops were triggered above 1.2400 and we once again stalled at the 1.2425 level in Asia, only to see much of this move retraced in London. With no data out of Canada today, we’ll be focused on the North American equity reaction to the G20 statement. Later this week we get a speech from BoC Governor Carney as well as CPI for October. While the US and UK are also releasing their October inflation data this week, it probably matters a little more for Canada, since the outlook for the BoC is probably more data dependent than for the Fed or the BoE.

Majors
This weekend’s G20 summit produced a strongly-worded communiqué, but no specifics and no coordinated action. The statement left a lot of wiggle room for individual countries to do as much or as little as needed, with two of the five immediate steps listed in the G20 statement – those involving monetary policy and fiscal policy - including the qualifier “as appropriate” to domestic conditions. Disappointment in the G20 lack of action saw yen crosses open sharply lower in the Asian session, with EURJPY hitting a low of just above 1.20, although it has recovered to some extent through the overnight session, and is now trading around 1.22. The biggest currency mover overnight was GBP, which managed to undo all of Thursday’s/Friday’s losses, trading back up above 1.49, despite the terrible house price data overnight. The rally in GBP was reportedly due to Middle East and Asian buyers on stops.

Data

• Australia’s ex-inflation retail sales increased by 0.1% in Q308, falling short of expectations for a 0.4% increase. The weak result shows the influence of high effective interest rates and the erosive influence on household confidence of the global credit crisis.
• Japan’s Q3 GDP was worse than expected, contracting by 0.4% Q/Q annualized, compared to expectations for a 0.1% gain. Q2 also saw a sizeable downward revision from -3.0% to -3.7%. Japan has joined the host of other countries that posted two consecutive quarters of declining GDP in Q2-Q3 this year.
• The UK’s Rightmove house price measure weakened further in November to -7.1% Y/Y from -4.9% in the prior month.
• The Eurozone’s trade balance for September was bang-on expectations with a $5.7B deficit, unchanged from the prior month.