The Forex Daily Digest – August 27, 2009

The USD moved higher against the EUR for a third day and the JPY rose as potential restraints on industrial excess in China and a smaller-than-forecast gain in orders for some U.S. durable goods encouraged demand for safety. The JPY and USD rose against counterparts including the AUD on speculation investors will reduce demand for higher yields. Sterling dropped for a sixth day versus the EUR in its longest stretch of declines since January on bets the U.K.’s economic recovery will lag behind that of the 16 nations sharing the common currency.

Crude oil fell for a second day as the USD strengthened, discouraging demand for assets used to hedge against inflation. Oil dropped 0.9 percent as the USD advanced on a report that China is studying curbs on industrial overcapacity, increasing concern the global economic recovery will slow. Oil also declined after an unexpected gain in crude inventories.

A new report by two Canadian economists recommended Canada's banking regulator should license and approve all financial instruments available to investors in the country, even if they originate in the United States. The economic report from the Canadian Centre for Policy Alternatives also encouraged the swift creation of a single securities regulator in Canada to ensure that officials can correctly monitor markets and spot risky behavior or excesses before they become unmanageable.

Atlanta Federal Reserve Bank President Dennis Lockhart said in a speech to the Chamber of Commerce in Chattanooga, Tennessee that the U.S. economic recovery and the improvement in the labor market are likely to be "frustratingly slow." Lockhart is a voting member of the Fed's interest-rate setting committee this year. His remarks corresponded with the guarded tone about the economic outlook from policymakers reported by participants at the central bank's annual retreat in Jackson Hole, Wyoming last weekend. The Fed continues to determine when and how to exit its current monetary policy measures and zero-interest rate policy.

The Commerce Department reported a doubling in aircraft bookings during July drove orders for new U.S.-made durable goods up by 4.9%, which is the largest increase in two years. Excluding the 18.4% increase in transportation goods, orders rose 0.8%, the third consecutive gain and the greatest upward move in four years.

Economic reports scheduled for release today include the Initial Jobless Claims for the week of August 22nd. Also, the preliminary second quarter Gross Domestic Product numbers will be released this morning.

In earnings, expect American Eagle Outfitters Inc., Diageo Plc, Bank of Beijing, National Bank of Canada, Novell, Royal Bank of Canada, Shoe Carnival, and Toll Brothers.

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