Weekly Wrap-Up

The Canadian dollar fell to its lowest levels in eight months against its southern rival, the U.S. dollar, Friday amid a spate of glum economic data points and weak commodities prices.

In U.S. trading Friday, USD/CAD rose 0.21% to 1.0208. The pair is The pair was likely to find support at 1.0164 and resistance at 1.0232, the high of July 25. That extends the loonie’s losing streak against the greenback to six consecutive days. Data points play a major part in the Friday action in USD/CAD.

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Earlier today in Canada, official data showed that consumer price inflation, rose 0.1% in January, compared to expectations for a flat reading, after a 0.6% fall the previous month.

Core consumer price inflation, which excludes the eight most volatile items, also rose 0.1% last month after a 0.6% decline in December, in line with expectations.

In addition, retail sales in Canada dropped 2.1% in December, more than the expected 0.8% fall, after a 0.3% rise the previous month.

Core retail sales, which exclude automobiles, fell 0.9% in December, compared to expectations for a 0.1% slip, after a 0.2% decline the previous month.

There were no major data announcements in the U.S. today, but oil was able to snap a two-day losing streak. NYMEX-traded oil futures for April delivery rose 0.6% while Brent futures for April delivery added 0.65%, but those gains were not enough to support the Canadian dollar. Canada is one of the world’s largest oil producer and one of the top exporters of crude to the U.S.

Also weighing on the loonie is speculation that the next move out of Canada’s central bank will be to cut interest rates, not raise them.

Elsewhere, EUR/CAD rose 0.17% to 1.3460 while CAD/JPY added 0.12% to 91.54.

Other Forex - U.S. Dollar
The U.S. dollar was mixed against its major rivals late in Friday’s U.S. session as a decent German economic data point and rebounding U.S. equities kept traders from fully embracing safe-havens such as the greenback today.

In U.S. trading Friday. EUR/USD fell 0.09% to 1.3178 even after an encouraging economic release out of Germany. Earlier today, the Ifo institute’s business climate index, jumped to 107.4 in February from a revised 104.3 in January. That is good for the best reading since April and topped the consensus estimate that called for an increase to 104.9

GBP/USD slipped 0.09% to 1.5239. Sterling has struggled this week despite positive data points out of the U.K., indicating that some traders are concerned about the long-term of the U.K. economy. Speculation that the Bank of England may also restart quantitative easing efforts, which it halted in November, have also pushed cable lower.

USD/JPY advanced 0.34% to 93.43 and is currently trading near the highs of the session. Japanese Prime Minister Shinzo Abe is meeting with President Obama to discuss bolstering ties between the U.S. and Japan.

USD/CHF fell 0.07% 0.9306 and Looking at the greenback against some of the other riskier currencies, AUD/USD jumped 0.71% to 1.0322 while NZD/USD added 0.51% to 0.8383. The U.S. Dollar Index is up 0.13% to 81.59 in late trading.

Other Forex - Euro
The euro erased gains seen earlier in the session and is trading lower against the U.S. dollar late Friday, putting the common currency at risk of ending the week on a downbeat note.

In late U.S. trading Friday, EUR/USD fell 0.02% to 1.3187. The pair was likely to find support at 1.3039, the low of January 10 and resistance at 1.3245, the session high.

The euro sold off and is now hovering near six-month lows against the greenback after fter the EU Commission said the euro zone economy will shrink for a second year in 2013, driving unemployment higher as governments, consumers and companies curb spending.

The Commission forecast a 2013 GDP contraction of 0.3%, well above the November estimate calling for a contraction of 0.1%. Euro zone unemployment is expected to rise to 12.2%, above the Commission’s November estimate of 11.8% and above the 11.4% rate seen last year.

Good news out of Germany, the euro zone’s largest economy, has not been enough to boost the euro on Friday. Earlier today, the Ifo institute’s business climate index, jumped to 107.4 in February from a revised 104.3 in January. That is good for the best reading since April and topped the consensus estimate that called for an increase to 104.9

There were no marquee data points released in the U.S., but stocks there rebounded after two days of declines.

Traders will now turn their attention to elections in Italy scheduled for February 24-25. A surprise victory by former Prime Minister Silvio Berlusconi could roil Italian stocks and send the euro lower against the dollar.
Elsewhere, EUR/JPY rose 0.33% to 123.22 while EUR/CHF fell 0.16% to 1.2263. EUR/GBP gained 0.01% to 0.8650.

Stocks
U.S. stocks opened higher in subdued trade on Friday, despite Thursday's downbeat U.S. economic reports, as comments from St. Louis Federal Reserve Bank President James Bullard boosted sentiment.

During early U.S. trade, the Dow Jones Industrial Average edged up 0.28%, the S&P 500 index rose 0.36%, while the Nasdaq Composite index added 0.31%.

Stocks found support after St. Louis Federal Reserve Bank President Bullard said that the central bank's aggressive easy money policy will stay for a "long time."

On Thursday, the Federal Reserve Bank of Philadelphia said on Thursday that its manufacturing index fell to minus 12.5 in February from January’s reading of minus 5.8, contracting at the fastest rate since July.

The data came after Markit said that its preliminary U.S. manufacturing PMI index fell to 55.2 in February from 55.8 the previous month, compared to expectations for a reading of 55.6.

In addition, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending February 16 rose by 20,000 to a seasonally adjusted 362,000, compared to expectations for an increase of 13,000 to 355,000.

In the tech sector, Hewlett-Packard surged 6.96% after the company's quarterly revenue and forecasts beat expectations.

Texas Instruments added to gains, rallying 3.23%, after it raised its quarterly dividend by a third and said it will buy back an additional USD5 billion in stock.

Among commodity-linked companies, Newmont Mining jumped 1.28% after the biggest U.S. gold producer said on Thursday that a more disciplined approach to spending and cost cuts is its top priority.

Gary Goldberg is set to takes over as CEO on March 1.

Elsewhere, insurer American International Group soared 3.86%, after reporting fourth-quarter results that beat market expectations.

Meanwhile, financial stocks were broadly higher. Shares in JP Morgan advanced 0.81% and Citigroup climbed 0.83%, while Bank of America and Goldman Sachs jumped 1.05% and 1.32% respectively.

Citigroup said on Thursday that it overhauled an executive pay plan that shareholders rejected last year as overly generous, revising it to link bonus payments more closely to stock performance and profitability.

Across the Atlantic, European stock markets were sharply higher. The EURO STOXX 50 rallied 1.35%, France’s CAC 40 surged 1.74%, Germany's DAX climbed 0.71%, while Britain's FTSE 100 advanced 0.56%.

During the Asian trading session, Hong Kong's Hang Seng Index dropped 0.54%, while Japan’s Nikkei 225 Index climbed 0.68%.

Trading volumes were expected to remain light on Friday, with no major economic data due to be published in the U.S.

Gold
Gold futures traded lower during Friday’s U.S. session as stocks there bounced back following a two-day skid. But a late-day rally saw a sharp rebound in gold. The SPDR Gold Shares rallied more than 0.5% in the final two hours to close up 0.2% for the day. The ETF was down more than 1.5% for the week.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery were lower by 0.39% at USD1,572.50 per troy ounce in U.S. trading Friday. Gold futures were likely to test support USD1,546.35 a troy ounce, the low from June 1, 2012, and resistance at USD1,618.70, Monday's high.

While U.S. stocks have not reclaimed all of their losses from the previous two sessions, Friday’s bounce has been enough to send investors and traders in search of riskier fare. The S&P 500 reclaimed the psychologically important 1,500 level today, giving traders confidence that the two-day sell-off may be overdone.

On Thursday, gold futures fell to a seven-month low on speculation the Federal Reserve is preparing to slow its USD85 billion-a-month asset-buying program, also known as quantitative easing. Monetary easing programs usually depress currencies, in this case the dollar, which can translate to upside for commodities such as gold.

With fears heightened that an end to QE in the U.S. is imminent, the dollar has gained strength in recent weeks while gold looks poised to extend a multi-week losing streak.

On a related note, the SPDR Gold Shares, the world’s largest exchange traded fund backed by physical holdings of gold, will likely see its biggest weekly outflow in 18 months when the closing bell rings later today.

Elsewhere, Comex silver for March delivery plunged 1.06% to USD28.398 per ounce while copper for March delivery fell 0.57% to USD3.533 per ounce.

Oil
Oil futures traded slightly higher during Friday’s U.S. session, bouncing back from a two-day decline, but today’s efforts were not be enough to prevent a weekly loss for crude. Oil ended Friday 0.5% higher, but down 2.75% over the last seven days and down 3.87% from Tuesday's close.

On the New York Mercantile Exchange, light, sweet crude futures for April deliver rose 0.12% to USD92.95 per barrel in U.S. trading Friday. Earlier in the session, West Texas Intermediate futures reclaimed the USD93 per barrel and traded as high as USD93.47. The low of the day is USD92.49 per barrel.

Barring a significant move higher into the close, Friday’s gains will not enough to erase Thursday’s 2.5% plunge, nor will today’s action be enough for oil to skirt a weekly decline.

Traders now view WTI futures as range-bound in the USD90 to USD100 per barrel area. A move below USD90 would represent a violation of the 200-day moving average for oil futures, a bearish sign in the eyes of many technical analysts.

However, a move above USD100, which would like take Brent crude above USD120 per barrel, could be seen as a negative. With the global economic recovery still fragile, WTI above USD100 and Brent above USD120 could be catalyst to hamper growth and cause demand destruction, forcing oil down in the process.

On a related note, market participants have recently speculated that Saudi Arabia, the largest producer in the Organization of Petroleum Exporting Countries, may start pumping more crude this month to ebb prices lower to avoid lost demand.

Elsewhere, Brent for April delivery added 0.44% to USD114.03 per barrel on the ICE Futures Exchange.

Natural Gas
Natural gas futures jumped during Friday’s U.S. session on reports the U.S. could see uncommonly cool temperatures for this time of year over the next several weeks.

On the New York Mercantile Exchange, natural gas futures for March delivery advanced 0.94% to USD3.276 per million British thermal units in U.S. trading Friday. The contract has traded as high as USD3.280 and as low as USD3.246.

Expectations that a cold front will hit the U.S. East Cost in the next 11 to 15 days lifted natural gas futures. Earlier this week, ndustry weather group MDA Federal said it expected a "chilly, unsettled pattern" with below-normal temperatures settling in for much of the nation in its one to five-day outlook.

Natural gas futures typically move on U.S. weather forecasts. The U.S. heating season, which runs from November through March, sees peak demand for gas. About half of U.S. households use gas for heating purposes, according to Energy Department data.

High inventories and warmer-than-expected temperatures have weighed on natural gas futures this year, sending the commodity down 3.1% on year-to-date basis prior to today.

On Thursday, the U.S. Energy Department’s Energy Information Administration said supply was 2.4 trillion cubic feet for the week ending February 15.

Due to the U.S. shale boom, the country is now one of the largest gas producers in the world, but demand has yet to keep pace with production there, forcing natural gas futures lower over the past several years.

Still, with today’s gains adding to a decent week for the commodity, natural gas futures are on pace for their first weekly gain in five weeks.