CAD Gains, EUR Loses
Hawkish commentary from Bank of Canada Governor Carney overnight saw the CAD gain across the board Thursday in New York. Carney noted that the Canadian economy is in a “very different place” than its peers, and that withdrawal of some of the monetary stimulus may become appropriate as the economy grows consistently above the trend. In a thin market, EURCAD dropped steadily as investors diversified away from the EUR and into to a ‘safer’ CAD. In fact, Carney noted that besides strong fundamentals, there is an “element of safe-haven premium” supporting CAD. Relatively weak Canadian data today – June trade deficit CAD1.81 bn, the widest in 21 months, July housing starts -13.6k – did not deter CAD bulls. Risk in general remained soft due to mixed data in the US and a lack of major headlines from Europe. Greece’s Deputy Finance Minister Staikouras said that the government would present its budget plan – to reduce deficits by EUR11.5 bn – to the EU by Sept. 14, and hoped that the next tranche of bailout funds would come “right after” a positive review by the Troika. Reuters reported that most of the cuts would come from layoffs, salary and pension cuts. US jobless claims dropped 6k last week to 361k, taking the four-week average down 9k from a month earlier. The June trade deficit narrowed by $5.1 bn, with exports up 0.9% m/m and imports down 1.5% m/m. EURSEK slid to 8.23, a record low. Swedish Finance Minister Borg said the government has room in its budget to support further stimulus. He added it is too early to call Sweden a safe haven, and it remains to be seen how a strong SEK will affect the export sector. There is limited sign of any verbal intervention, with Borg calling the trend in krona appreciation a normal market development.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank