The US dollar is firm against the dollar-bloc currencies, and sterling, but is heavier against the euro and yen.  

The 13th consecutive year-over-year decline in China’s imports helped keep the pressure on the commodity producers.Despite New Zealand reporting strong Q3 manufacturing sales (3.5% vs.-0.2% in Q2), the pendulum of market expectations have continued to swing for a rate cut later this week.  

The drop in oil prices, and secondarily the widening of the interest rate gap with the US, sent the Canadian dollar to new multi-year lows yesterday.Although the price of oil has stabilized today, the technical damage has been done, and the Canadian dollar has extended yesterday’s losses. It is difficult to see any significant technical hurdle until close to CAD1.40. However, near-term the CAD1.3600-CAD1.3630 appears to be the next target. Support for the US dollar is seen just below CAD1.3500.  

The euro is within yesterday’s ranges. Given Thursday’s dramatic moves, we argue that 1) the leg lower than began in mid-October is complete and 2) with the rally to almost $1.10, many of the short-term positions have been cleared.  This sets up for a better two-way market.As we saw yesterday, there are those who are inclined to buy euro dips, on the ideas that downside is limited and that, at the very least, the correction is not over.At the same time, there are those focusing on the divergence theme and interest rate differentials, are sellers of euro bounces. 

EMU confirmed Q3 GDP at 0.3% for a 1.6% year-over-year pace.What was important about today’s release though was the details available. Contrary to conventional wisdom, the weak euro is not spurring an export-led expansion.It is still primarily an internal affair.Household consumption rose 0.4%.A little less than expected, but a touch better than the revised 0.3% increase in Q2.Government expenditures, rose 0.6%, twice the pace the market expected and what was seen in Q2.Gross fixed investment was disappointingly flat (consensus 0.2%), but the Q2 figure was revised to 0.1% from -0.5%.