- The U.S. Institute for Supply Management said its index of national factory activity rose 1.5 points to 54.7 last month, the highest level since December 2014.
- A gauge of new orders jumped 7.2 points to its highest level since November 2014. Twelve industries, including petroleum, electrical equipment, appliances and components and machinery, reported growth in new orders last month. Export orders also rose, but order backlogs were unchanged. A measure of factory employment hit its highest since June 2015 and the production sub-index rose 4.3 points.
- Manufacturers reported paying more for raw materials, which suggests producer inflation could push higher in coming months. The ISM’s prices index surged 11 points to its highest level since 2011. It was the 10th straight month of increases in raw materials prices.
- In a separate report the Commerce Department said construction spending increased 0.9% to USD 1.18 trillion in November, the highest level since April 2006. It was boosted by gains in both private and public sector investment.
- Spending on private construction projects jumped 1.0% in November to the highest since July 2006 as single-family home building, as well as home renovations, increased. Investment in private nonresidential structures, which include factories, hospitals and roads, rose 0.9% after tumbling 1.5% the prior month. Public construction spending rose 0.8% in November to the highest level since March
- The solid increase in construction spending prompted the Atlanta Fed to raise its fourth-quarter GDP estimate by four-tenths of a percentage point to a 2.9% annual rate. The economy grew at a 3.4% pace in the third quarter.
- We took profit on our EUR/USD short yesterday at 1.0350. There is a risk of recovery attempts in the coming days, especially given accelerating inflation in the Eurozone.
- Eurostat said prices in the Eurozone rose 1.1% yoy last month, sharply accelerating from a 0.6% annual increase in November and 0.5% in October. Eurostat estimated that energy prices jumped 2.5% yoy in December, the first rise in more than a year, while food alcohol and tobacco prices rose 1.2% and services were also 1.2% more expensive than a year earlier. The factor that held inflation down was non-energy industrial goods, the prices of which rose only 0.3% yoy, the same as in the four previous months.
- We can see some profit taking on EUR-selling positions if tomorrow’s FOMC minutes are less hawkish than expected.
USD/CAD: Target lowered to 1.3220
- The CAD made a slight gain against a much stronger USD on Tuesday, holding in despite a sharp reversal in prices for crude oil, a major Canadian export.
- Oil reached 18-month highs in morning trade yesterday before retreating as the greenback hit its highest level against a basket of currencies since late 2002 on the back of data showing solid growth in U.S. manufacturing.
- Oil is rising on Wednesday, with top exporter Saudi Arabia expected to increase prices for its crude as part of planned supply cuts.
- Canada’s trade report for November and employment numbers for December are due on Friday, following data released just before Christmas that showed cooling inflation and a contraction in economic growth.
- We have lowered the target on our USD/CAD short to 1.3220, which is slightly above the rising trendline. The nearest important support is 1.3330.
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By GrowthAces.com – Daily Forex Trading Strategies