Canadian consumer prices in April fell more than expected to 0.4% on an annualized basis which was the lowest in fourteen years. Economists were expecting prices to ease to 0.6% from 1.2% the month prior, but a 2.5% decline in energy costs lead to a 0.1% drop of inflation during the month of April.
[U][B]Fundamental Headlines[/B][/U]
[I]• Japan Gains on GDP Report – Wall Street Journal
• Downturn Sets Up Surge in Oil Prices – Wall Street Journal
• Green shoots persist despite GDP slump– Financial Times
• U.S. Said to Consider Stripping SEC of Power, Shifting Some Duties to Fed TARP – Bloomberg
• VIX Falls to Lowest Level Since Before Lehman Bankruptcy as VStoxx Plunges– Bloomberg[/I]
[B]USDCAD[/B] – Canadian consumer prices in April fell more than expected to 0.4% on an annualized basis which was the lowest in fourteen years. Economists were expecting prices to ease to 0.6% from 1.2% the month prior, but a 2.5% decline in energy costs lead to a 0.1% drop of inflation during the month of April. The core component also fell to 0.1% from 0.3% which is the reading more closely watched by the BoC as clothing and shelter prices were lower by 0.6% and 1.0% respectively. Easing inflation will allow the central bank to keep their rates at their record low of 0.25%. BoC deputy governor John Murray in a speech yesterday that “The risks of either a deflationary collapse or an inflationary spiral have been greatly exaggerated.” He also expected that the central bank would keep rate at their current level for another year
[B]EURUSD[/B] – German producer prices fell by 2.7% on a yearly basis which was the biggest drop in almost 22 years. Declining cost for electricity help push prices down by 1.4% during the month of April. Meanwhile, Italian industrial orders fell for the eight straight month by 2.7% in March led by a 33% drop in foreign demand. The data shows that deflation growth risk remain which could lead the ECB to consider lowering their interest rate further and adding to their bond purchasing program. Discuss the topic and your trade ideas in the EUR/USD Forum.
[B]GBPUSD[/B] – The BoE released their minutes from their May policy meeting which showed that the decision to increase their bond purchase program by £50 billion and keep the benchmark rate at 0.50% was unanimous. The MPC also saw inflation at risk to stay below their 2% target as an economic recovery was expected be relatively slow. The central bank said that although there were promising signs, there remains a considerable amount of slack in the economy. The one new piece of commentary was that the committee was alert to the possibility of inflation resurging. Therefore, we may see any new quantitative easing efforts limited as they fear the longer term repercussions. For more news and resources, visit the Pound Currency Room.