A quiet day of trading for the global forex markets today, as a lack of real news, coupled with the ongoing problems in Europe combed to focus attention on deeper structural issues, rather than any intra day news items. Even a speech by ECB president Jean Claude Trichet failed to lift the sentiment in Europe, following his assertion that a global recovery was indeed underway, and was at pains to distant himself from Thursday’s ECB meeting, as well as refusing to answer any questions regarding the current problems in Portugal. As a result the euro dollar has traded in a narrow range, struggling higher under the weight of the sovereign debt issues which are likely to resurface during the week, with Portugal almost certain to request a bail out package as it approaches the next bond auction. With bond rates now above the 7% threshold set in Lisbon, it is only a question of when, not if !!
Elsewhere, the Chinese trade balance came in at 13.1B against a forecast of 20.9B, as export growth fell whilst imports expanded faster than expected, which should ease some of the ongoing trade tensions between the US and China. With no news today in the US markets, the focus was on Canada, with Building permits followed by the Bank of Canada outlook survey, with the former coming in worse than expected at -11.2% against a forecast of 0.8%. This was followed shortly afterwards by the BOC outlook which painted a rosier picture for the economy, and as such the USD/CAD lower much as expected, and indeed this is a feature that is likely to continue over the next few weeks and months as the prospect of a rate rise in Canada increases with the US dollar sold in favour of the Loonie, as we break below parity and beyond. The dollar index reflected the global mood in forex markets, trading between 80.81 and 81.31, in a day of inaction which was reflected across both equities and commodities.