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US productivity stronger than expected


U.S. Productivity Was Stronger Than Expected

The 0.9 per cent Q2 productivity growth increase of 3.4 per cent for output beat estimates, following revisions to both series over the past three years that tracked the annual revisions in the last GDP report. There were boosts to the Q1 data but big downward bumps in Q3 and Q4. Hourly compensation growth of just 1.6 per cent in Q2, following a sharp boost to the Q1 figures and downward Q3-Q4 revisions, as seen in the last set of income data. The mix left unit labor cost growth of 0.6 per cent in Q2 after a boost in Q1 but trimmings in Q3-Q4.

A Safe Haven Bid Returns as the U.S. and North Korea Verbally Spar

The dollar gained traction on Wednesday as investors buoyed assets that represents flight to quality. U.S. shares remained on the defensive, as riskier assets withdrew, after the U.S. Q2 productivity bounce, having rotated lower as the leaders of N. Korea and the U.S. Secretary of State Tillerson has sought to downplay the “fire and fury” remarks leveled by Trump on Tuesday. North Korea has since threatened to attack Guam if provoked and Trump has since tweeted about modernizing the U.S. nuclear arsenal, which makes the U.S. the “most powerful nation in the world.”

The dollar gained strength against most currencies butt the yen was the strongest moving higher amidst the rhetoric, while Treasury yields slumped 4 basis points.

China’s CSI 300 only fell fractionally, though Japan’s N-225 sank 1.3 per cent and bourses in Europe are 0.8-1.8 per cent lower. Volatility climbed 20 per cent, but still remains below the 200-day moving average. The Canadian dollar declined for the eighth straight day, but the economic data was stronger than expected.

Canadian Housing Starts Grew

Canada housing starts grew at a 222.3k unit rate in July following the 212.9k pace in June. The increase is contrary to expectations for a modest slowing in July. Multiple urban starts grew 10.4 per cent to a 142.0k unit pace while single detached starts fell 3.9k to 64.2k units. The six-month moving average of total starts improved to 217.6k in July from 215.2k in June.

By region, B.C. and Alberta were the main drivers of starts growth in July. Starts in Toronto trended lower in July, but were close to the average level seen this year. Vancouver housing starts edged slightly higher due to an increase in townhome and apartment construction.


The rebound in the USD/CAD continued to Wednesday despite the stronger than expected housing starts and building permits in Canada. Prices are poised to test resistance near the 38.2per cent Fibonacci retracement level at 1.2929.

Support on the currency pair is seen near the 10-day moving average at 1.2580.  Momentum has turned positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal.

This occurs as the spread (the 12-day exponential moving average minus the 26-day exponential moving average) crosses above the nine-day exponential moving average of the spread.  The MACD histogram, which is a momentum oscillator, is printing in the black with an upward sloping trajectory which points to a higher exchange rate.

The RSI (relative strength index) which is a momentum oscillator that measures accelerating and decelerating momentum, edged slightly higher showing that positive momentum was decelerating. The current reading of 49 on the RSI is in the middle of the neutral range and reflects consolidation.