Forex Investment and Currency Trading

FX Update
Advance Retail Sales (Survey: 0.0%, Actual: 0.2%)
Retail Sales less auto (Survey: 0.1%, Actual: 0.1%)
Business Inventories (Survey: 0.6%)
Upcoming Data: PPI, Empire Manufacturing, Net long-term TIC flows
USD
The USD is broadly weaker against a number of the majors this morning despite an upside surprise in both Advanced Retail Sales and core Retail sales. The USD weakened significantly after news from Wachovia that the bank had experienced an unexpected loss as a result of sub-prime mortgage holdings. This morning’s news has caused concern that the worst of the credit crisis has yet to pass.
EUR/USD
EUR/USD is higher again this morning on the back of [...]

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For nearly 6 months now USD/CAD has straddled an exceptionally narrow seven big figure range between 0.97 and 1.04, oscillating above and below parity. This behavior of a currency caught between a rock and a hard-place is well justified and likely to persist in the months ahead, although we anticipate a slight bias toward CAD strength within a 0.95 – 1.05 range in Q2/Q3. Protecting USD/CAD’s downside, notably below 0.95, are considerations of valuation. PPP is important for USD/CAD than most currencies, as Canadians have the capacity to vote with their feet and shop south of the border, as they [...]

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FX Bottom-line: A thought provoking asymmetrical relationship between CAD and commodity prices has developed since December 07. Traders are reluctant to buy CAD as commodity prices rally citing Canada’s close ties with the US, but are eager to sell CAD on commodity sell-offs as part of a broader risk aversion trade. This relationship is expected to continue until more evidence of a bottoming in the US economy emerges.
Unfamiliar Commodity Relationship for CAD
The emergence of China and a synchronized global growth cycle favoured commodity prices and CAD given Canada’s healthy mining sector and 173 billion barrels of proven crude oil reserves [...]

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Current account balance (Survey: -183.8BN, Actual: -172.9 BN)
Empire Manufacturing (Survey: -7.4, Actual: -22.2)
Net Long Term TIC Flows (Survey: $60.0BN, $62.0BN)
Industrial Production (Survey: -0.1%, -0.5%)
NAHB Housing Market Index (Survey: 20)
Upcoming Economic releases: FOMC Rate Decision, PPI, Housing Starts, Building Permits
US data today was mixed:  TIC data as expected at +$62 bio, with a record net purchases of $36 bio of US Treasuries; industrial production -.5% on a big fall in utility production though smaller fall in manufacturing; Q4 current account narrowed $4.5 bio and is expected to continue to improve on slowing US demand and the declining trade value of the [...]

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