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Tuesday
Feb142012

Daily FX Commentary, February 14, 2012

President Obama’s budget proposal came and went yesterday with little fanfare, seen as a formality already predicated by his state of the union speech and more politicking, as anything the Democratic President brings forward is sure to be voted down in the Republican run House. While this is something to focus on later this election year, it begs the question of how we can expect government to work when it takes a whole year to hold an election. That’s 25% of a Presidents term.

The Bank of Japan surprised markets and eased policy today, boosting its asset purchase plan by 10 trillion Yen and setting an inflation target of 1%. This news sent the JPY lower against 15 of its 16 major currency pairs and through 78 against the USD for the first time since Jan 25.

Moody’s rating agency has followed S&Ps lead and downgraded six European countries including Italy, Spain and Portugal. “Policy makers have made steps forward but we do not think they have done enough to reassure the market that we are on a stable path,” said Alistair Wilson, chief credit officer for Europe at Moody’s in London.   Moody’s also warned that it may cut the triple-A ratings of France, Britain and Austria. London has never had its prestigious triple A rating tarnished before.

European share markets continue to advance as German investor confidence rose to a ten month high. Analysts predicted the ZEW would rise to negative 11.8, down from January’s -21.6 reading. The actual number came in at +5.4, which is a very good sign from Europe’s largest economy. China’s Premier Wen Jiabao has also vowed to help the eurozone get through their debt issues with no specifics mentioned and no talk of any giant Pandas.

On this side of the pond investors are waking up to stock futures in positive territory and commodity futures in a bit of a mixed bag. We have retail sales and business inventories out of the US today. With only minor reports out of Canada we will continue to watch developments out of the Mediterranean for guidance.

If you live to be a hundred, I want to live to be a hundred minus one day so I never have to live without you.

A. A. Milne

Monday
Feb132012

India says it has lost $500 billion to tax havens

India, which recently signed on to an international convention designed to combat tax avoidance and evasion, has lost an estimated $500 billion to illegal deposits in overseas tax havens. Indians, according to India’s Central Bureau of Investigation AP Singh, are the largest depositors in foreign, particularly Swiss, banks. Singh lamented the lack of political will on the part of the havens to help investigate the illegal deposits, saying that their economies have become “geared to this flow of illegal capital.” He blamed the inadequate international cooperation and bank secrecy laws for the difficulties his department faces in getting back the “stolen wealth.” It is estimated that as much as 50 per cent of India's GDP is produced in the underground economy.

The Convention facilitates international co-operation for a better operation of national tax laws, while respecting the fundamental rights of taxpayers.

In signing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which was developed by the OECD and the Council of Europe in 1988, India joins thirty-one other signatories, including Canada, in allowing tax officials from one country to enter another country to conduct investigations into citizens’ tax compliance, including interviewing and examining tax records. It explicitly provides for the exchange of information in criminal cases involving tax. The information is also used to combat money laundering.

Under the terms of the convention, the rights of taxpayers are protected. The convention is set up so that if personal data are provided by one state to another, “the Party receiving them shall treat them in compliance not only with its own domestic law, but also with the safeguards that may be required to ensure data protection under the domestic law of the supplying Party (Article 22).”

The convention was last amended at the June, 2011 meeting of the G20.

Monday
Feb132012

Daily FX Commentary, February 13, 2012

European stock markets are painted green this morning, giving a lift to North American stock and commodity futures. The risk trade is back on early this morning after the Greek parliament passed its latest austerity plans in return for the needed €130bn bailout from the IMF and ECB.

Japan’s economy contracted 0.6% in the fourth quarter, blamed on the global economic slowdown that has affected many countries and corporations in the fourth quarter.

President Obama will propose his election year budget today. Of particular interest to markets will be his deficit projections, which are based on growth forecasts that will be released along with the budget at 11:15 EST.

There are no other economic releases today for North America, but it will be a week filled with data. Almost 10% of the S&P will report earnings along with some of the biggest commodity names here on the TSX. Highlighted US economic releases this week include retail sales, business inventories, housing starts, CPI, PPI and the minutes from the previous FOMC meeting. Canadian economic data slated for release this week include manufacturing survey, international transactions in securities and consumer price index.

 

Everything happens to everybody sooner or later if there is time enough.

George Bernard Shaw

Friday
Feb102012

TD Bank has big goals in its US expansion

TD Bank’s CEO Edmund Clark had to overcome investor doubts when he took the bank, Canada’s second largest, into the US market in 2004, according to a report in Bloomberg. That year, TD bought 51 per cent of Banknorth Group of Portland, Maine, for $3.5 billion. By 2007 TD had acquired the remaining 49 per cent of Banknorth, and in 2009 bought Commerce Bankcorp of New Jersey for $8.33 billion. Several other acquisitions followed, including the purchase of Chrysler Financial Corp. from Cerberus Capital Management for $6.3 billion. Now TD is one of the top ten lenders in the US by assets and the fifth largest in greater New York City. Clark wants to be third.

Clark is quoted as saying that they did it—beat the skeptics and succeeded in not only breaking into the market but flourishing—by sticking to consumer lending and staying away from subprime mortgage loans. TD posted profits of close to $3 billion in US consumer banking over the last three years, at the same time that banks like Bank of America and Citigroup were being bailed out by the government.

In the five years ending December 31, 2011, shares in TD had gained 42 per cent, beating all other Canadian banks. Bank of America has seen a drop of 87 per cent over the same period, according to Bloomberg.

Clark takes a hands-on approach to banking and says it’s important for a CEO to understand all aspects of the institution he runs. The hands-on approach and keeping a narrow focus have paid off.

Friday
Feb102012

Daily FX Commentary, February 10, 2012

By Tim Harling, European and Asian share markets are down after a chinese report that showed both their exports and imports were down showing proof of the global slowdown, the first drop in exports in 2 years.

ECB president Mario Draghi had some stern words for both bankers and Greek politicians yesterday. Firstly in response to some banker’s comments that accessing the ECB LTRO program carries a “stigma”, “There is no stigma whatsoever on these facilities,” Draghi said at a press conference in Frankfurt yesterday. “Some have made some sort of statements that I would call statements of virility, namely it would be undignified for a bank, a serious bank, to access these facilities. Now let me say that the very same banks that made these statements access facilities of different kinds -- but still government facilities.” Secondly, with the latest round of ‘promises of austerity’ out of Greece, Draghi said the ECB will not give the funds to Greece based on promises as done in the past but will based on implementation.

North American equity futures are down as investors go into a ‘risk off’ mode. Markets get US and Canadian trade numbers out this morning which could get an initial positive reaction, but under the larger cloud of Europe today it will most likely be short lived.

Expected Range: 1.0005 – 1.0090

A laugh is a surprise. And all humor is physical. I was always athletic, so that came naturally to me.

Chevy Chase

Thursday
Feb092012

Daily FX Commentary, February 9, 2012

China’s inflation rate unexpectedly accelerated in January, showing a rise in CPI of 4.5% vs. expectations of a 4% increase. This was partially accounted for by a jump in consumer spending over the Chinese New Year. In Japan, machinery orders plunged 7.1%, attributed to a strong Japanese Yen and ongoing concern over global economic slowdown. Finally, New Zealand’s unemployment rate fell further than expected, from 6.6% to 6.3%. 

European equity markets are up slightly, as the Bank of England left rates unchanged at 0.5% and decided to raise their asset purchase target by £50bn, bringing the total amount to £325bn. The European Central Bank has also left rates unchanged at 1.0% as widely expected. Their focus remains on the Greek debt crisis and any possible role it may have to play in helping them avoid an impending default. 

Greek debt talks are moving back to Brussels after more marathon sessions in Athens, with no decision on a deal at press time. The IMF continues to push the ECB to take part in any haircut deal that Greece and the private sector might agree upon as the timeframe for any such deal to be done is rapidly closing. 

USD/CAD remains in a sideways trading mode as we come to the end of a week that was and is light in North American economic data. Canada releases its new housing price index today and out of the US we get initial jobless claims as per usual on this fine Thursday. 

 

A man who dares to waste one hour of time has not discovered the value of life.

Charles Darwin 

Wednesday
Feb082012

Daily FX Commentary, February 8, 2012

Markets continue to be range bound searching for direction. Not much to speak of over night, Germany’s trade surplus rose to €158bn in 2011 after record exports that rose 11.4%, exceeding €1tn for the first time in its history.

Canada’s Prime Minister Stephen Harper is in China discussing trade with Chinese Premier Wen Jiabao. Mr. Harper seems to have found success in getting his top priority, an investment protection agreement, signed on the first day of his trip clearing the way further trade agreement discussions. “Investment flows between Canada and China are at an all-time high, contributing significantly to jobs and economic growth in both countries,”Mr. Harper said in a prepared statement.

Greece may or may not have an announcement today on a debt swap deal as Mr. Papademos may or may not meet with coalition leaders to discuss a propossed deal as the missed another deadline to secure a second aid package.

 

There has been a clear crisis of confidence that has seriously aggravated the situation. Measures need to be taken to ensure that this vicious circle is broken. 

Christine Lagarde 

 

Friday
Feb032012

Daily FX Commentary, February 3, 2012

Mr. Bernanke did an excellent job of depressing markets yesterday when he testified to the House Budget Committee on how slowly the economy is recovering and all that over hangs it. Markets closed yesterday pretty much where they opened.

This morning’s Canadian unemployment numbers where disappointing, +2.3k vs. +24k expected. This pushed the unemployment rate up to 7.6% a nine month high and unfortunately continuing the trend of losing fulltime jobs and creating part time jobs.

The big news event this week is finally upon us in the form of US unemployment analysts are expecting a net increase of 140k jobs and for the unemployment rate to remain unchanged at 8.5%. The risk will be found in any revisions to previous numbers.

Now that Greek fatigue has set in we can focus on Iran and the possibilities of a military strike there as tensions are building in the region. Commodity markets will be paying particular attention to developments there. With Canada being a commodity based currency we will also be watching.

 

If football taught me anything about business, it is that you win the game one play at a time.

Fran Tarkenton

Thursday
Feb022012

CIBC FirstLine cutting out stated income mortgages

CIBC’s announcement that it will no longer accept new mortgage applications based on stated income, and that they are imposing a maximum limit of $1 million on loans is likely a sign that Canada’s banks are feeling more pressure from the government to show that they are acting to reduce risk in the mortgage business. The move by CIBC will make it more difficult for the self-employed and for new immigrants to qualify for mortgages. It will also affect property investors who rely on their portfolio income. The so-called business-for-self (BFS) lending has been compared to subprime lending in the United States.

Documents made public this week from the Office of the Superintendent of Financial Institutions (OSFI) indicate that the regulator is concerned that Canada’s banks are becoming too loose in their lending requirements for mortgages and home equity lines of credit (HELOC) in order to be competitive. OSFI is increasing its scrutiny of the housing sector, informing the banks that it will now monitor their practices with regard to HELOC on a quarterly basis. OSFI is particularly concerned about the activities of speculators in the Toronto and Vancouver housing markets, saying that “additional work is needed here” to quantify the presence of “pure speculators” in the market.

Minister of Finance Jim Flaherty, as quoted in the Globe and Mail, seemed to be downplaying the matter, while at the same time saying that he shared the OSFI’s concerns. “I was informed of what their assessment showed with respect to a few financial institutions, which is a matter of concern that is being corrected.”

Wednesday
Feb012012

Daily FX Commentary, February 1, 2012

The whipsaw markets continued yesterday and by my count today is a risk on day in the rotation as markets continue to trade in a consolidation mode. Yesterday’s weaker than expected economic data out of the US and Canada quickly poured a bucket of water on any smoldering optimism the markets were feeling from some positive headlines out of Europe Monday. This morning we find ourselves back about where we were yesterday morning almost like yesterday didn’t happen. There’s a movie plot in there somewhere.

More optimistic news out of Greece overnight coupled with a rise in China’s manufacturing index against the headwinds of a slowing global economy, has pushed European and Asian share markets higher. This in turn is pushing up the futures in US equities who are already in a good mood in advance of the Facebook IPO announcement expected later today. Markets will get some US manufacturing and employment data this morning and Mr. Bernanke is testifying before the House Budget Committee. There is no data out of Canada today.
 
Gold $ 1,749
Oil $ 99.04
 
Expected Range: 0.9955 – 1.0045
 
USD/CAD 0.9988
EUR/USD 1.3187
EUR/CAD 1.3172
AUD/CAD 1.0693
GBP/CAD 1.5837
 
 
If it doesn't matter who wins or loses, then why do they keep score?
Vince Lombardi

Tuesday
Jan312012

Canada's housing market to cool in 2012, but no bubble to burst: BMO

BMO report predicts that Canada's housing market, though somewhat overvalued, will not experience a major correction, but a cooling down in 2012.

Reprinted with permission from Condo.ca

A new report from BMO’s Economic Research department seeks to shed some cooler light on the heated debate about real estate in Canada. “Cool” is the operative word in this report, authored by BMO’s Dr. Sherry Cooper, Chief Economist, BMO Financial Group.

“In our view, the housing boom will more likely cool than correct, even in condo-driven Toronto,” says Cooper.

The facts, according to Cooper, don’t support the more pessimistic view that the housing market is in a bubble and a major correction, if not collapse, imminent. For the most part, housing prices in the country are only “moderately high.” Low interest rates will continue to positively affect affordability, and this will allow incomes to “catch up” with higher housing prices and restore “proper” valuations.

Click to read more ...

Thursday
Jan262012

Daily FX Commentary, January 26, 2012

Federal Reserve Chairman Ben Bernanke did not disappoint us yesterday, as the FOMC rate announcement and forecast became the highlight of the day, and from the market’s perspective, possibly a game changer in setting forward looking expectations. “Exceptionally low rates through 2014” will be the phrase most quoted today. The FED also set a goal of 2% on inflation and has also left the door open to further “Quantitative Easing”, should inflation remain below target and unemployment stubbornly high - the current economic environment in the US. This sent gold to a six week high and USD/CAD to parity with a little help from our friends across the pond. European markets also took EUR/USD up through 1.3100.
 
USD/CAD is seeing good bids below parity, and as USD sellers exhaust themselves, look for a pop higher in funds to find better levels to sell. Buyers should have their bids in, as we haven’t seen these levels in 3 months, and month end demand should also be kicking in, providing further support.
 
Markets are continuing the risk on trend this morning with stock futures up ahead of some key economic data out of the US today. Greek debt talks are scheduled to resume today adding to the optimism.

USD/CAD 1.0015
EUR/USD 1.3157
GBP/USD 1.5695
AUD/USD 1.0670

You miss 100% of the shots you don't take.
Wayne Gretzky

Wednesday
Jan252012

Daily FX Commentary, January 25, 2012

In today’s chart of the day below, USD/CAD has been consolidating since September and is poised for a breakout. Question is, which way?

USD/CAD traded higher overnight because of negative comments from the IMF’s Lagarde and weaker than expected UK GDP. The UK economy shrank by 0.2% in the 4th quarter of 2011, after a rise of 0.6% in the previous quarter, edging it towards recession. This prompted the Bank of England Governor Mervyn King to say that slowing inflation gives room for further bond purchases, which will help to prevent the economy from falling into a "renewed severe downturn."
 
Japan has announced its first trade deficit in 30 years, this contrasts their history of being one of the world’s largest exporters of cars and electronics. Most of this swing can be directly attributed to the tsunami disaster back in March, as Japanese infrastructure continues to be rebuilt and exporters struggle with a rising JPY and damaged manufacturing facilities.
 
The Australian dollar rose after inflation there came in unexpectedly higher lowering the chances of an expected rate cut. It has since come off to trade below 1.05 against the USD.
 
The ECB has reiterated that it remains opposed to any restructuring of its Greek bond holdings as the debt was required for monetary policy purposes. This was in response to pressure for it to join the private-sector investors in taking a haircut on their holdings.
 
Today’s market highlight will be the first time that the FOMC releases its own forecasts for the benchmark interest rate.
 
And in case anyone missed it last night President Obama is in fact running for reelection.
 

“As a nuclear power—as the only nuclear power to have used a nuclear weapon— the United States has a moral responsibility to act.”

Barack Obama

Tuesday
Jan242012

Daily FX Commentary, January 24, 2012

Expected Range: 1.0085 – 1.0155
Gold $1668.3
Oil $99.33
 
USD/Cad is a bit higher overnight as the overall ‘risk’ trade softens. The Euro is being whipsawed as markets are sensitive to further delays in the Greek debt talks, while getting strong economic data in the form of higher than expected PMI numbers across the board (save France). Overseas equity markets are down and the trend is continuing across time zones to North America.
The IMF President Christine Lagarde was in the press yesterday telling Germany that she needs to give more € to the ESFS and back down from its position of more aggressive and continued austerity on the debt laden countries. She also pointed out that the IMF will not be giving any money to Europe as it has enough money sloshing around the Euro zone to fix their own debt problems, as the IMF’s funds are needed to help other nations around the world dealing with economic shocks that are out of their control.
In other news Greece has published a list of some 4,000 alleged tax evaders. The top offender owing nearly €1 billion, the list seems to be comprised of mostly owners of business’ that have gone out of business. I wonder if it was their intention to show that this Greek issue of debt nonpayment really is a Greek phenomenon that starts at the top and goes all the way down the line. Somebody pass the Ouzo.
Today marks the start of the FOMC’s two day meeting, markets will also be watching tonight’s State of the Union speech from President Obama.
This morning’s Canadian retail sales are expected to be up +.02%, this isn’t expected to move markets as our Loonie is at the mercy of larger global macro issues at the moment.
 
 
I can resist everything except temptation.
Oscar Wilde

Monday
Jan232012

Daily FX Commentary, January 23, 2012

Expected Range USD/CAD: 1.0065 – 1.0150
Gold: $1670.5
Oil: $99.20
 
A relatively quiet start to the week as markets prepare for a week full of meetings, economic data, earnings and headlines. Risk continues to be on even if mildly so. EUR/USD is trading either side of 1.30 this morning, the first time we have seen this key technical level since the start of the year. Some might chalk this up to a market short squeeze. The Australian dollar has also risen to its highest levels breaching 1.05 against the USD for the first time since Halloween of last year. Rumor has it that Greek bondholders have given their maximum haircut level and are awaiting a response from EU leaders as they meet today to discuss. The EU has also finalized its oil embargo against Iran over the weekend.
The earnings reporting in the US will continue this week with names including such American bellwethers as Halliburton, McDonald’s and Boeing. The US Republican Primaries continue with Newt Gingrich winning the last one in South Carolina, showing the battle for the party’s leadership continues to show no clear leader at the moment.
This week’s FOMC meeting looks to be the focus of the week ahead as this meeting marks the first time they will release a forecast on interest rates, as they see it. Historically the FOMC has never given forecasts; this is part of Mr. Bernanke’s push for more transparency at the Federal Reserve. This week will also finish with the infamous Davos conference, where the headlines will vary from what Ms. Lagarde’s warnings on the global economy and requests for more monies from world leaders, to what they will be serving with afternoon tea.
 
 
“A public-opinion poll is no substitute for thought.”
-Warren Buffett

Friday
Dec302011

Daily FX Commentary, December 30, 2011

By Tim Harling, Jameson Bank

Expected range 1.0160 – 1.0250

On this, the final trading day of 2011, there are no data releases so markets look to be driven by month end rebalancing and year end flows mainly. The Euro has dropped below 100 yen for the first time since June of 2001. It is also poised for the first back to back annual drop since 2001 as debt concerns still weigh on the currency and investors seek out solace in the USD and JPY.

The Yuan has also risen to its highest level against the greenback since the dollar peg ended in 2005 at 6.3009, mainly due to a very positive yearend report from the Peoples Bank of China.

We are seeing some relative strength in the risk-on and commodity based currencies this morning as stock markets are closing on a positive note to end the year, although most equity indices and commodities are poised to end the year in the negative.

In today’s trivia question, name the only two countries in the world with a lower growth rate over the past decade than Italy (Europe’s third largest economy). Answer at the bottom of this commentary.

As an end note, it seems that the nations of Samoa and Tokelau have cracked Einstein’s theory of relativity and solved the conceptual problems of time travel. As the people of Samoa and Tokelau slept in their beds and the clock passed through midnight on Dec 29 it then entered into Jan 1. It was 119 years ago that their ancestors made a similar move in the opposite direction - not exactly light speed but quite the feat nonetheless. See the re-aligned time zone below.

Thursday
Dec292011

Top 10 economic facts of 2011, predictions for 2012, from BMO

Gold was the top-performing commodity of 2011, but overall, commodities were down more than 8 per cent.

To celebrate the New Year, BMO's Deputy Chief Economist, Doug Porter, has offered up five interesting facts from 2011, and five predictions for 2012.

2011 Interesting Facts

Canada grew faster than Brazil in the past year. Despite a series of challenges both in Canada and globally, the Canadian economy likely grew 2.3 per cent, close to expectations and not far from its long-run average. Over the latest four quarters, GDP is up 2.4 per cent year-over-year, outpacing not just most major industrialized economies (the U.S. was up 1.5 per cent and the Eurozone 1.4 per cent), but even the 2.1 per cent advance in emerging market darling Brazil over the same period.

The Canadian dollar was the weakest currency in the G10 in the past year. Global investors were not so impressed with the Canadian dollar in 2011, driving the currency down more than 2 per cent on the year. So, not only did the loonie weaken against the U.S. dollar and the disaster-hit Japanese yen (which was in fact the strongest major currency this year), but even against the beleaguered euro.

Click to read more ...

Wednesday
Dec282011

Tips for small business owners to minimize tax payable

BMO Says 'Make a List and Check it Twice': 5 Year-End Tax Tips for Small Business Owners

BMO Bank of Montreal released 5 year-end tax tips and strategies for Canadian small business owners that can pay dividends come tax time.

"While 2011 may be a year remembered most for its economic challenges, many small business owners we talk to are cautiously optimistic and confident about their ability to finish 2011 on solid ground," said Cathy Pin, Vice President, Commercial Banking, BMO Bank of Montreal. "Before the holiday rush, now is the time to do a quick financial check-up with a small business specialist and your accountant to consider some straightforward tips and strategies to help minimize the amount of 2011 income tax payable," added Ms. Pin.

Click to read more ...

Thursday
Dec222011

Builders Direct launches online purchasing tool for real estate buyers

Builders Direct Inc. has launched Builders Direct, an innovative, patent-pending online purchasing tool that will revolutionize Canadian real estate purchasing. Buyers can browse through floor plans, live inventory and pricing lists provided by builders and developers and apply for mortgage financing, entirely online.

Every week, Buildersdirect.ca will reveal exclusive deals from builders—up to 20 per cent off the price of high-demand real estate properties. Interested buyers can reserve properties by purchasing an access voucher from Builder's Direct. Once the payment is processed, the buyer will take the voucher to the real estate sales center for access to exclusive pricing. The voucher fee goes to Builder's Direct, which is pleased to offer buyers these unprecedented savings.

And, since Canadian real estate attracts investors from around the world, Buildersdirect.ca is fully navigable in 52 languages.

 

Click to read more ...

Wednesday
Dec212011

Oil and copper top picks for investors in 2012: Scotiabank 

Scotiabank Commodity Price Index outlook for 2012

After falling for three consecutive months, Scotiabank's Commodity Price Index edged up by one per cent month over month (m/m) in November, boosted by a sharp rebound in oil and firmer base metal prices. The All Items Index remained 6.7 per cent above a year earlier and will likely end 2011 just above year-ago levels. While most commodity prices remain at profitable levels, there has been a marked loss of momentum after an 18 per cent year over year (yr/yr) gain in late 2010.

The star performers of 2011, among the 32 commodities covered in Scotiabank's Commodity Price Index, were sulphur (the No. 1 commodity for the second-year running, used in DAP fertilizers), premium-grade hard coking coal from Western Canada into Asian growth markets, potash (a fertilizer) and hogs and cattle (pushed up by herd liquidation across North America).

 

Click to read more ...