Morning Foreign Exchange Report

By Warren Hayhoe,

Columnist, Canadian Money Magazine

Central Trader, Jameson Bank

USD/CAD 1.0445         
GBP/CAD 1.6354
EUR/USD 1.3665
GBP/USD 1.5674
CAD/EUR 1.4266
JPY/CAD 0.011589
Oil opened at $74.02, currently $75.51
Gold opened at $1093.70, currently $1117.60
CRB closed at 267.92, -1.79

Today:

• Jim Flaherty said to Tighten Canada’s mortgage industry rules for first time home buyers amid further bubble talk.
• Canadian manufacturing sales rose slightly less than expected in  December, driven by gains in sales of cars and aerospace products.
• Foreigners bought US assets steadily in December, but the pace was slower than a month before as investors dumped bills at a record level.

Observations:

Investors return from the three-day holiday and stock index futures are pointing to a strong start for the broader markets. Futures were positive though off their highs for the morning after Kraft Foods reported earnings that were slightly ahead of analyst expectations. Kraft shares fell 1.5 percent. The US dollar fell against the Australian and New Zealand currencies as corporate earnings improved and commodities advanced, encouraging demand for higher-yielding assets. Canadian manufacturing sales rose by 1.6% from last month while the US manufacturing index increased from 15.9 to 24.9.

USD/CAD 1.0445 and EUR/USD 1.3658 at 8.37 AM.

Last Friday:

• The number of workers filing new application for jobless benefits fell last week, reversing a spike that had raised concerns about labour market weakness; stock futures gain.
• US Fed in talks with money-market mutual funds to assist in extracting $1 trillion from the financial system as policy makers prepare for the first interest rate hike since June 2006.
• Markets opened weaker in response to China increasing reserve ratio requirements until reversal when: January Retails sales +0.5% versus the expected 0.3%, ex-autos +0.6% versus the expected 0.5%, reported. 

Overnight:

• Commodity driven currencies rally over speculation that China economy will continue to expand even after monetary tightening.
• The Bank of Australia surprisingly keeps its rates unchanged this month and will keep it relative to the concerns that Euro debt concerns threaten the recovery.
• Euro finance ministers delay a bailout of Greece, saying it will give them one month to show it can right it’s unbalanced budget before demanding steep spending cuts and fresh taxes.

Thought of the Day

“A wise man will make more opportunities than he finds.”  --  Francis Bacon