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Market Wire:
Trade War, Recession Fears Overshadow Data

Matt Eidinger August 8, 2019

Jobless claims beat market expectations

Canadian new housing sales fall nationwide for the second straight month

OIS rates indicate a second US rate cut in September 

Seasonally adjusted initial jobless claims in the US fell to 209,000 for the week ending August 3, beating market expectations set near 215,000 and reversing course from last week’s revised figures. The four-week moving average increased slightly to 212,250 – 250 higher than last week.

The US Department of Labor reported Thursday that continuing jobless claims decreased 15,000 to 1,684,000 for the week ending July 27, nearly 3% lower than this time last year. Finally, the insured unemployment rate remained steady at 1.2%.

North of the 49th parallel, Statistics Canada released June’s New Housing Price Index, which indicated construction of new houses fell 0.1% nationwide during June. For the past year, housing prices have been either flat or falling slightly. The largest increases were in the Ottawa (+0.6%) and Gatineau (+1%) regions. In contrast, Calgary declined, with a monthly decrease of 1% and a year over year decrease of 2.4%.

The US/Canadian dollar spot rate was largely untouched this morning after yesterday’s loonie selloff brought Canada’s currency to its weakest levels against the greenback since mid-June. Likewise, the trade-weighted US dollar index remains stable at 97.55.

What would have been a relatively quiet week in FX markets has turned tumultuous as a result of renewed tensions between the US on China. This time, instead of slapping tariffs on one another, the US opted to target China’s currency the Yuan as part of an ongoing strategy to draw attention to an overvalued greenback.

Indeed, after sitting around 50% for much of the past week, implied probabilities of a September rate cut rose and now indicate the chances of another 25 bps cut to the fed funds rate stand at 76.5%.

In bond markets, 10-year treasury yields slipped to 1.623% – the lowest level in three years. These developments in US fixed income markets, coupled with negative bond yields and falling central bank rates worldwide, have intensified fears that a worldwide recession is either coming or already underway.

Matthew Eidinger
Fintech Specialist, Dealing Operations

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