Looking forward however, the number does suggest that consumer spending in New Zealand is beginning to slow. This seems to be the opposite of what is going on in Canada. Retail sales in Canada jumped 1.5 percent in the month of January, which is the strongest pace of growth in 7 months. Canadian consumers are showing no signs of cutting back as employment remains firm. However that has not helped the Canadian dollar today which has been subjected to a significant amount of intraday volatility. When good news fails to be reflected in the price action of a currency, we become skeptical of the price action. Even though the worry lies in slower US growth spilling over into Canada, the strong numbers confirm that at least for the time being, that is not happening.
USDJPY Back at 100
US dollar weakness has resumed with USD/JPY falling back towards 100. Aside from USD/JPY and CAD/JPY, all of the other yen crosses actually ended the day in positive territory. There was no Japanese economic data released but Bank of Japan officials continued to sound a cautionary tone. Shirakawa talked about the downside risks to growth while Nishimura indicated that the central bank's long-term priority is to boost consumption. The Wall Street Journal had a good article today about the problems with wage growth in Japan. The central bank seems to acknowledge that this is an issue which may partially explain today's comments. The merchandise trade balance is due for release this evening. The big rally in the Yen actually did not come until February which means that the trade surplus could remain steady.
British Pound Above 2.0
The British pound broke the 2.0 level against the US dollar thanks to broad dollar weakness. There was no UK economic data released, which is why the strength of the pound was only seen against the US dollar and Japanese Yen. The currency resumed its slide against the Euro as the market expects the UK economy to continue to underperform the Eurozone. The economic calendar is empty once again, which means that US data and risk appetite will be the primary driver of the British pound for the next 24 hours.
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- Wednesday, March 26 - 2008 at 01:49
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Kathy Lien, Chief Strategist, Daily FXWednesday, March 26 - 2008 at 01:49 UAE local time (GMT+4)
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