Carry Trades Take Another Beating (page 2 of 2)

Although it is a fool's game to try to pick a bottom in USD/CAD, a bottom is a growing possibility now that we are finally seeing evidence that oil prices may be topping and the Canadian economy maybe weakening. Wholesale sales tend to be a good leading indicator for retail sales which makes today's surprise 2 percent drop worrisome. The Australian and New Zealand dollars have also seen great volatility - the end of day bounce in equities has helped both currencies recover.

Euro Still Stuck in a Range; SNB Roth Says Do Not Rule Out Rate Hike

In a market that is flush with volatility, the Euro has become the most uninteresting currency to trade. Since the middle of last week, the EUR/USD has been stuck within a 100 pip range. The ECB has not wavered in their hawkish tone which is a strong signal to the market that the central bank has no plans to intervene in the currency or to lower interest rates. The latest comments come from Liebscher who said that significant inflation risks remain. He is firmly convinced that Eurozone growth is ongoing and rather robust. The trade balance is the only number due from the Eurozone tomorrow - if the strength of the Euro was to have any impact on economic data, the most obvious would be trade. It is also important to note that Swiss National Bank President Roth told the markets not to rule out an interest rate hike, which should be a long term positive for the Swissie.

British Pound Benefits from Stronger Employment Data

The British pound was probably one of the best performing currencies today. Even when the sharp weakness in the Dow caused a sea of red in the foreign exchange market, the British pound held strong against the US dollar. Given that the Bank of England minutes were mixed, this strength most likely stemmed from the stronger employment numbers. The amount of people claiming unemployment fell by 12.8k last month, which was four times greater than the market's expectations. Average wages also climbed, which suggests that tomorrow's retail sales numbers could be stronger than expected. As for the BoE minutes, the committee voted 8 to1 to leave interest rates unchanged. They were concerned about the impact of the credit markets and even considered a precautionary rate cut, but growth had not slowed enough to warrant one and inflation is still projected to remain near their 2 percent target.