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Canadian Inflation Soars to 5 Year High On Gas Prices

Thursday, 21 August 2008 12:00:19 GMT  |  David Song, Currency Analyst

Fundamental Headlines

·    EURUSD – Manufacturing activity among the 15 European nations improved slightly as the PMI index ticked higher, while the service sector continues to face downside risks. Manufacturing PMI rose to 47.5 from 47.4, while services PMI fell to 48.2 from 48.3 in July. The downside risks to growth has become a major concern for the ECB, and may force the central bank to leave the benchmark interest rate on hold as economic growth stalls.  Discuss the topic and your trade ideas in the EUR/USD Forum.

·    GBPUSD – U.K. retail sales unexpectedly improved to 0.8 in July, recovering from last month’s record fall, and crossed the wires better than the 0.2% decline expected by market participants. The breakdown revealed that apparel and household goods purchases rebound from -6.9% and -5.7% to 1.5% and 1.6% respectively. Resilient consumer spending could generate enough domestic growth to allow the BoE to refrain from cutting rates until price pressures ease. For more news and resources, visit our GBP/USD Forum.

·    USDCAD – Headline inflation in Canada rose to a 5 year high of 3.4% in July, fueled by higher energy costs, while the core CPI held steady at 1.5%. Upside inflation risks have become a growing concern for the BoC, but the recent decline in oil prices may help the central bank to focus on downside growth risks as economic activity cools. For more news and resources, visit our Canadian Dollar Currency Room.

   • Fears of the Fates of Fannie, Freddie Crimp U.S. Stock-Index Futures (link) – Wall Street Journal
• FDIC Faces Balancing Act in Replenishing Its Coffers (link) – Wall Street Journal
• Financial Woes Halt Dollar Rally (link) – Financial Times
• Yen Rises as Credit-Market Losses Damp Demands for Higher Yields (link) – Bloomberg
• ICBC Becomes World’s Most Profitable Bank on Loans (link) – Bloomberg

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