Commdollars Get Crushed

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Market Drivers Dec 8, 2015

Aussie gets hurt by CNY data ore prices
CAD above 1.3550 as oil sinks
Nikkei -1.04% Eurostoxx -0.96%
Oil $37/bbl
Gold $1072/oz

Europe and Asia:
AUD NAB Business Confidence 5 vs. 3
CNY Trade Balance 343B vs. 395B
GBP MP -0.4% vs. -0.1%
EUR GDP 0.3% vs 0.3%

North America:
No Data

Commodity dollars were crushed today as weaker than expected trade data from China along with slumping oil prices sent both Aussie and loonie to fresh session lows.

In China the Trade data a surplus of only 54.1B versus forecasts of 64B as exports declined for sixth consecutive month while imports fell as well. The fall in imports was not as severe as anticipated as they declined by -8.7% from -11.9%, but the news was little solace to the Aussie which drifted lower all night coming within a few pips of the .7200 level.

The trade news from the world’s biggest energy user suggested that domestic demand remains weak and that theme reverberated through the markets with oil and iron ore sinking to fresh lows. The Canadian dollar also took a hit with USD/CAD rising to 1.3550 as it hit 11 year highs on weaker oil prices that broke the $38/bbl level.

After a short squeeze oil is right back to its downtrend, but we doubt that it will stay at these prices for long as it is approaching grossly oversold levels. Still the slump in commodities is clearly having a massive impact in commdollars and they could move to fresh session lows if crude does not find a bid in North American session.

The one commodity that has escaped the rout is the kiwi. The New Zealand dollar was down only slightly in Asian and European trade and vastly outperformed the other antipodeans. Tomorrow is the RBNZ meeting with most market participants anticipating a rate cut, but the most recent data from New Zealand has been surprisingly strong. Last night’s Truckometer readings and manufacturing activity led some analysts to revise GDP growth from 0.5% to 0.8%.

Therefore there is a small, but very real chance that the RBNZ may choose to hold rates steady, which would provide the kiwi with an even bigger lift as it will remain the predominant carry trade in the advanced industrialized world.

Elsewhere the calendar is relatively quiet today with North American docket barren and only a smattering of second tier data out of UK. The UK manufacturing data came in relatively in line with expectations and cable tested the 1.5000 level to the downside as news from UK shows little reason for BOE to consider a hike in the near term.

The EUR/USD tried to make another run at the 1.0900 level but failed to hold the highs and was back to 1,0850 by mid -European dealing. The pair appears to have settled into 1.0800-1.0900 range for the time being but the downside pressure remains.

Boris Schlossberg
Managing Director

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