Franc Slips to 4-Month Low Against Dollar

Daily Analysis - 06/10/2017

US Nonfarm Employment Report in Focus as Greenback Sustains Gains

The US dollar touched a four-month high against the safe-haven Swiss Franc, buoyed by recent data that points to resilience in the US economy. Investors will be reviewing the official jobs figures, due later Friday for catalysts that could spur additional upside momentum in the US currency near-term.

US Factory Orders Rise as Deficit Shrinks

A Commerce Department report unveiled on Thursday revealed that orders for US-made goods rebounded 1.20% in August following a sharp decline in the prior month, outpacing the 1.10% gain forecast by economists polled by the Wall Street Journal. The better than expected number suggested strong business spending could help offset the economic drag from Hurricanes Irma and Harvey. Separately, the US trade deficit narrowed in August as exports of goods and services jumped to the highest point in over two and half years. The trade gap contracted -2.70% to $42.40 billion, beating the consensus estimate for the August trade deficit narrowing to $42.70 billion whereas July’s shortfall was revised downwards to $43.60 billion. Exports surged 0.40% to $195.30 billion, while imports slipped -0.10% to $237.70 billion. USDCHF rallied to just shy of 0.9800 early Friday, its highest intraday point since May 30^th.

ECB on Track for Tapering Quantitative Easing

Policymakers at European Central Bank are eager to press ahead with their plans to end their massive bond-buying program next year, despite reservations from some members on wage inflation and Euro strength. According to minutes from the bank’s September meet, the ECB’s governing council sounded increasingly confident that the currency bloc’s economic recovery would last, and that market developments were favourable enough for a reduction in quantitative easing. The Central Bank is widely tipped to announce a winding down of asset purchases from January next year at its October 26^th meeting on monetary policy. DAX 30 futures dashed to a record high after the release of the minutes. Futures ended Thursday at 12975, with 13000 representing a strong resistance zone on the upside, a breakout above which could see prices scale higher.

Japanese Real Wages Increase

A government report released overnight showed that Japanese real wages grew in August from a year ago, recording the first rise in eight months. In nominal terms, monthly cash earnings increased at an annualized 0.90% pace, reversing from the previous month’s revised -0.60% drop and higher than the 0.50% anticipated by economists. Adjusted for inflation, earnings grew 0.10% in August, compared to a -1.10% decline in the prior month. Separate data from the country’s statistics bureau revealed the average monthly income per salaried household gained 1.00% and 0.20% year over year in nominal and real terms, respectively. The recent batch of wage figures is likely to ease investor concerns about the sustainability of an upturn in Japanese consumer spending. Meanwhile, the AUDJPY pair tumbled below the lows of the prior session in Friday morning trade to currently hover around 87.750.

Canada’s Trade Deficit Widens

After several consecutive moves to tighten policy, Canada’s trade deficit unexpectedly widened in August as exports fell for the third straight month, signalling economic weakness that could dissuade the country’s Central Bank from lifting interest rates again this month. The shortfall expanded to CAD$ 3.41 billion ($2.73 billion), marking the fifth-biggest on record following a revised CAD$ 2.98 billion deficit in July. Exports declined -1.00% to CAD$ 43.63 billion on lower shipments of metals and consumer goods, while imports stayed virtually unchanged at CAD$ 47.04 billion. The weaker than expected trade report is the latest indication of a stalling Canadian economy after a stellar 12-month run that saw the country top the Group of Seven economies in terms of GDP growth. EURCAD is gaining in early Asian trade to around 1.4725, with the pair remaining locked within a tight range.