Forex Commentaries

Financial and Economic News and Coments

USA and Canada

• The Bank of Canada held its overnight rate target steady at 3.00% for a third straight meeting, saying it remains "appropriately accommodative" amid sluggish economic growth. The BOC's statement dropped a reference from its July 15 decision that said inflation risks were "balanced" and did not hint that slow growth ay lead to an interest-rate cut. The BOC said "the level of economic activity is slightly lower than expected in july but still close to the economy's production capacity." Regarding the inflation front, the BOC said "the recent decline in both spot and futures prices for energy means that the spike in total CPI inflation expected between now and the first quarter of 2009 will be lower than projected in July." The BOC "will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term," according to the BOC's statement today.

• US factory orders increased a more-than-expected 1.3% m/m in July, following an upwardly revised 2.1% m/m gain in June, data from the Commerce Department showed. Excluding transportation orders, factory orders climbed 1.0% m/m in July after rising 2.7% m/m in June. A key barometer of business spending -- nondefense capital goods orders excluding aircraft -- rose 2.5% m/m in July after increasing 1.6% m/m in June. Factory orders rose 8.3% y/y and nondefense capital goods orders excluding aircraft surged 8.8% y/y in July. Overall, the figures signal an improving outlook for the US economy.

• The Federal Reserve said in its Beige Book that US economic conditions remain "slow" as consumers pull back and focus on essentials, though exports continue to provide some boost to the economy. Meanwhile, businesses reported that they have raised retail prices in response to the recent rise in material and other input costs. However, many Fed district banks noted the latest decline in energy and commodity prices, which along with retrained wages, should keep inflation from further accelerating.

Europe

• The eurozone services purchasing managers index (PMI) rose to 48.5 in August, rebounding from July's 5-year low of 48.3, according to a report by Markit Economics. The August figure had been revised up from a flash August estimate of 48.2.

• Germany's services PMI eased to 51.4 in August from 53.1 in July, showing growth slowing less sharply than flash August estimate of 50.6, data from Markit Economics showed.

• European company investment fell 1.2% q/q in Q2, the first decline in five years, and household expenditure declined 0.2% q/q after stagnating in Q1, Eurostat reported. The eurozone Q2 GDP contracted 0.2% q/q, matching expectations, and expanded a less-than-expected 1.4 y/y. The numbers are pushing the eurozone economy to the brink of a recession.

• European retail sales unexpectedly fell 0.4% m/m in July, down 3.0% y/y, Eurostat said.

• UK consumer confidence stayed at a 4-year low in August. The shopper sentiment index held at 52 in August, the lowest since the survey began in May 2004, Nationwide Building Society said.

• While the CIPS UK services PMI increased more than expected to 49.2 in August from 47.4 in July, it still held below 50 for a fourth month, indicating contraction, according to data from Chartered Institute of Purchasing and Supply.

• UK shops raised prices 3.8% y/y in August, the most since records began in 2006, the British Retail Consortium reported.

Asia-Pacific

• Australia's GDP increased a less-than-expected 0.3% q/q in Q2, the weakest pace in two years as consumers reduced spending, following an upwardly revised 0.7% q/q gain in Q1, data from the Bureau of Statistics showed. The Australian economy grew a less-than-forecast 2.7% y/y in Q2 after a 3.6% y/y jump in Q1.

• Activity in Australian services sector contracted for a fifth consecutive month in August. The Australian Industry (AiG) Group-Commonwealth Bank performance of services index fell to 39.3 in August, below the 0.0 dividing line between growth and contraction, from 42.8 in July, according to the latest survey from the Australian Industry Group and Commonwealth Bank of Australia. The August low reading suggests the softness in Australia's services sector activity will persist.

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