My USD watch and learning: Bank of England Leaves Rates Unchanged at 0.50%

The following is a summary of the main economic events of December 9th, 2010:

The Bank of England leaves key interest rate unchanged at 0.50%, as expected. Economists anticipate the bank will hold rates at this level well into 2011. The Bank also makes no changes to its quantitative easing program, keeping it at £200B.
Initial jobless claims in the U.S. fall to 421K from 438K last week. The slide was virtually in-line with the consensus estimate of 425K. Continuing claims fall to 4086K from 4237K. Market sentiment improved and USD slipped following the release.
The Halifax house price index shows U.K. house prices declined in November. The index falls by 0.1%, after rising 1.8% in October. Economists had expected a rise of 0.6%. Prices are now at the lowest level since September 2009. Sterling is the worst performing major currency on the day.
The Canadian new housing price index rises 0.1% in October, in-line with analysts’ expectations. It’s the third consecutive month of gains.
Talks between China and North Korea result in a commitment from Pyongyang not to further inflame the situation, according to Xinhua. Experts say the tone of the meetings likely mean that North Korea has agreed that there will be no escalation from its side.

The Asia/Pacific session will have several important releases.
First up at 6:50 p.m. ET, Japan will release domestic corporate goods price index for November. Economists expect a reading of 1.0%; higher than the 0.9% in the prior month. The index measures prices for goods and services purchased by Japanese companies.
At approximately 10:00 p.m. ET, import data for November is expected from China at 24.5%, lower than the 25.3% the month prior. Chinese imports are an excellent leading indicator of global demand and this indicator can shape sentiment about global growth. Expect AUD and CAD to fall if imports fall below 23% y/y.
Also at 1:20 a.m. ET, Bank of Japan Governor Yutaka Yamaguchi will speak in Tokyo. Any comments about growth, deflation and yen intervention will be closely followed.

The European session will be quiet with only one important release from the U.K. and a speech from the Euroarea.
At 2:00 a.m. ET, U.K. PPI input for November is expected at 8.3%, lower than October’s reading of 8.0%. With UK inflation on the back burner, this report is unlikely to have a large impact, especially with food and energy prices skewing the data.
At 11:15 a.m. ET, ECB President Jean-Claude Trichet and Bank of Spain Governor Miguel Ordonez will speak at a news conference in Madrid. Continuing comments on the sovereign crisis are the key takeaways. Talk about a successor for Trichet might also be interesting.
The U.S. Treasury sells $13 billion in 30-year bonds at a much lower yield than expected. The auction resulted in a yield of 4.41% compared with the 4.46% the bonds were trading for in the ‘when issued’ market. USD/JPY quickly fell 25 pips following the sale but later rebounded.

The North American session will have two important releases from the U.S.
At 8:30 a.m. ET, U.S. trade balance for October will be released. Economists are calling for a reading of $-43.9B, from $-44.0B the month prior. An improvement in the U.S. trade deficit could help the dollar rebound but this report doesn’t typically have a long-lasting impact.
At 9:55 a.m. ET, the University of Michigan sentiment survey for December is expected from the U.S. at 72.5, up from 71.6 in November. This report is critical because it captures the holiday shopping season; expect it to set the tone for the final hours of trading in the week.

My USD watch and learning