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Daily Forex Update: May 24, 2013

Published 05/24/2013, 05:38 AM
Updated 05/14/2017, 06:45 AM
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  • Despite a bumpy start to the day on Thursday, stocks rallied to regain some of their lost ground thanks to encouraging economic data from the United States. Initial Jobless Claims were in line with analysts' expectations, while U.S. New Home Sales exceeded expectations and continue to show signs of improvement.
  • The correction is continuing with declines in Europe and Asia. The futures market points to a lower opening on Wall Street. The loonie and energy prices are also down. In the wake of the strong markets early in the year, this period of consolidation appears quite normal.
  • Despite declining stock markets, the Canadian dollar performed well, winning back part of the ground lost the day before. Historical analysis shows a significant decline in the correlation between the loonie and North American stocks (measured via the S&P500). Between 2009 and 2012, the correlation was 81.9%, but has only been 28% since the start of the year. While traditionally we saw a falling loonie during market corrections, this maxim appears less and less valid.
  • Market gains since 2009, an improving job market and rising real estate prices are all highly favourable for the American consumer. This improved economic outlook bodes well looking forward, and should eventually result in a rise in interest rates on both sides of the 49th parallel. The current historically low rates could soon be a thing of the past.
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