Weekly Sentiment Paper

Distributed by: One Financial

For the Week of: 12/07 through 12/13

Written by: Andrei Wogen

Email: finance.wogen@gmail.com

Last Week in Review!

Australian Dollar!

New Zealand Dollar!

Japanese Yen!

China Renminbi; Onshore, Yuan!

Euro Area: Euro!

British Pound!

11

Canadian Dollar!

12

United States Dollar!

13

Last Week in Review

Australia GDP for the third quarter much weaker than expected; terms of trade continues
to decline as commodity prices continue to fall while household consumption did okay
US employment data comes in much better than expected; average hourly earnings rises
as well
ECB leaves rates along; Draghi stepping back from his commitment to do QE saying that
the ECB needs more time to assess things before making a decision
Canadian employment data comes in much lower than expected showing a loss in newly
employed individuals
China manufacturing continues to weaken; bets continue to rise that more easing is
coming from the PBoC pushing equities higher in China
Bank of Canada leaves rates alone and continues to say that recent higher inflation is just
noise

Australian Dollar
Overall Picture and Its Tone
Overall the Australian is weak economically. The weak points continue to be weak mining
sector and the employment sector while the consumer also remains weak and feels weak as
both retail sales and consumer sentiment have been lower respectively. As for the business
sector, manufacturing and services sectors continue to weaken as does business sentiment.
Politically speaking, the country is doing well but recent budget problems have caused the
government to cut down on spending and adjust policy in order to keep debt from rising too
much. This action has also caused consumer sentiment to weaken and there is likely more cuts
on the way as the mining industry continues to slow. Another thing that has caused some worry
from the government is the strong housing market. Prices continue to rise which is helping to
support consumers some but has caused the government to voice their disproval of these high

prices worrying about a bubble forming. As for the central bank they continue to remain neutral
to slightly dovish while continuing to keep rates at historical levels. They continue to say that
rates are the right level to foster growth and investment but they also continue to verbally talk
down the Australian Dollar which they say is too high. Still no actual intervention though.yet.
Overall then the tone of Australia is neutral to slightly negative
. Overall Sentiment of the Australian Dollar

As for the overall sentiment towards the Australian Dollar, this is now fully
negative overall.
Last Week in Review
The RBA left rates alone last week as expected. In their statement, things remained the
same though they sounded a bit more downbeat on the Australian Dollar. They mentioned that
the AUD was still too high relative to commodity prices which continue to fall. Sounds like they
are continuing to get more and more negative on the Aussie Dollars value and could be getting
very close to intervening in the market to help bring it down. The other big event last week was
Q3 GDP release which in came in lower than expected overall. The terms of trade in particular
was disappointing as commodity prices continue to fall. In light of this calls for rate cuts by the
RBA are growing as the Australian economy continues to weaken. Also in terms of data,
building permits data improved again as did Australias trade deficit with imports falling into
negative territory and exports rising, coming in stronger than last month.The other big event
last week was the overall down move that occurred in the Australia Dollar as it continues to
weaken agains the US Dollar in particular.

The Week Ahead and Other Thoughts

This week the monthly employment data will be released on Wednesday. However it
should be noted that with all the recent changes to the data in how it is calculated its relevance
and authenticity has been shaken somewhat as of late. Still though, markets will be watching
anyway to get a gauge on Australias employment situation. Overall it is not good with
unemployment continuing to stay elevated and the participation rate continues to fall. Other
data to mention for the week will be Home loans data and consumer confidence numbers on
Tuesday, the latter being the one to watch as the consumer has begun to start to feel a bit better
after a huge decline earlier this year but the improvement is still nothing to be very optimistic
about. The other data to watch is business sentiment numbers on Monday. Overall though, the
story to watch will be how the Aussie Dollar continues to perform. Whether it will continue its
fall or whether we will get a rebound of some sort.

New Zealand Dollar

Overall Picture and Its Tone
New Zealand as a whole continues to do well though has weakened some over the past
few months, economically speaking. Lower commodity prices, lower house prices and lower
inflation have been the main weaknesses for the New Zealand economy. Other weaknesses have
been a deteriorating trade balance, along with falling exports and a fall in business and
consumer sentiment which has also translated into lower consumer spending via retail sales
data. However all is not bad in New Zealand and actually things are pretty good despite these
negatives. Though business sentiment is low, it is still high in historical terms which has been
seen in the manufacturing sector in particular which remains strong as well as does the
industrial sector. As for trade, imports continue to rise while the labor market also remains
strong with falling unemployment and increased employment overall. However, as is the case
around the world overall, wages continue to remain weak. Looking to the housing market now,
after rising prices from the beginning of this year, they have fallen now from their highs after
implementation of policy to help cool the housing market went into effect several months back.
This, and now weaker building permits, continue to cause the housing market to weaken
overall though in some parts, construction remains active overall. As for the government, they
continue to remain strong as pro-growth policies and increased government spending continue
to help support the economy and with the recent elections keeping the incumbent prime
minister in power for another term, there will likely be little change. In regards to the central
bank, after having tightened policy by raising rates three times this year beginning in March,
the central bank is now on hold indefinitely after falling commodity prices and lower inflation
have caused them to reassess their estimates of future inflation in the country. This is a pretty
big turnaround for them from just a few months ago when they were talking about seeing a
need to raise rates pretty consistently due to what they used to see as inflation pressures
building. However these pressures have since diminished or left altogether and so in response
the central bank is expected to be on hold until at least the middle of next year and possibly
longer if inflation doesnt start to pick up soon. They have also voiced their concerns about the
high valuation of the New Zealand Dollar relative to other currencies. This has caused the
RBNZ to intervene in recent months in the currency market to bring down the value of the
Kiwi. This is an obvious statement by the Bank that they are not willing to let the currency stay
too strong and will do something to help bring it down and so in light of this there continues to

be speculation that they will continue to intervene in the markets going forward. Overall then,
the tone for New Zealand remains in neutral territory overall.

Overall Sentiment of the New Zealand Dollar

The overall sentiment for the New Zealand dollar is neutral to negative as it
continues to move lower versus the Dollar but higher versus the Yen.
Last Week in Review
Last week the big event for the week was a speech made by Wheeler. The big news from
the speech was that there was no change to the RBNZs loan limits it set on housing a while
back. Wheeler mentioned that the limits amount to a 25 - 30 bps rate hike but that they would
remain in place until housing pressures eased (more). The more being my addition as housing
prices and the general real estate market has eased some over the past few months. Besides that
speech, data from New Zealand was sparse but continued to show weakness in the countrys
commodity sector as commodity price index number continued to deteriorate, in negative
territory again, and terms of trade data printed into negative territory on the back of weaker
commodity prices. Yet more signs of the strain that lower commodity prices, particularly milk
prices, are having on the country.

The Week Ahead and Other Thoughts

The RBNZ meeting on Wednesday is the even to watch this week from New Zealand. The
chance of a rate hike is very small in my opinion and really, in the markets too, as the market is
expecting the next rate hike to happen not until next year sometime as commodity prices
continue to move lower, putting pressure on inflation to the downside and the overall economy
softens somewhat. Still though, it will be interesting event to watch to see what the Bank has to
say about the current situation when they release their monetary policy statement at the
conclusion of its meeting and then what will be said during its press conference later on. I
personally expect a downward assessment on inflation and growth overall which will tell the
markets that another rate hike is still far from happening, at least for now. I also expect the usual
talking down of the Kiwi by the RBNZ as the Bank continues to see the exchange rate of the
NZD to be too high. How forceful that talking could be though is whats important. If there is
just a line of how high the NZD is, then there will likely be little reaction in the markets to that.
However if the Bank elaborates more and especially explains WHY the NZD is too high and
HOW it is affecting domestic activity, then there will likely be more of response in the markets.
Also too any mention of more intervention could get the markets going againlower. Other
data for the week will be Business PMI for November on Thursday, which has been strong as of
late, and monthly Electronic Card Retail sales data numbers on Monday.

Japanese Yen
Overall Picture and Its Tone
Japan as a whole is very weak right now, politically, socially and economically. On the
economic side, businesses continue to be weak as manufacturing, services and industrial sectors
continue to be weak however on a bright note, corporate profits continue to rise. On the
consumer side, consumer sentiment and consumption both remain weak as seen recently in
household spending and retail sales data. As for trade, imports and exports have been weak but
now both are improving some while the overall trade balance remains in negative territory.
Inflation also remains weak and continues to fall causing deflation to persist. On the
government side of things, debt remains high while recent tax hikes meant to bring down the
level of debt in the country have caused yet more weakness in the economy. The government in
general remains stuck in old ways and lacking reforms to help revise the economy. As for the
central bank they continue to remain very negative overall with low interest rates and and a
quantitative easing program that puts all others that have occurred or are occurring to shame as
its size is huge. A couple of weeks ago too, the central bank surprised the markets by
implementing and increasing their QE program. Finally, on the social side of things, as the
population continues to age the levels of debt continue to increase while other social
developments continue to cause weakness in the economy. Overall then the picture of Japan is
very negative right now.

Overall Sentiment of the Japanese Yen

The overall sentiment for the Japanese Yen is very negative right now as it
continues to move lower against pretty much everything...including itself.
Last Week in Review
There wasnt much in the way of data last week from Japan and focus seems to be fully
on upcoming elections on the fourteenth of December. Polls show at this point that Abe will
obtain a landslide victory in the elections allowing him to gain a majority in parliament and
keep his job. This is a bit of a surprise to me if this does come to reality. I would have expected
more of a resistance by the people towards Abe and his policies especially as his Three
Arrows are doing little to help the common man out of his woes.economically speaking. As
for the data last week, starting from the top: Capital spending came in better than expected
while manufacturing data slipped lower. Vehicle sales also fell further into negative territory.
Services PMI data showed a massive improvement in what some are calling a weather related
improvement. New business for the services sector continued to rise as do new orders.

However business sentiment remains bleak. Employment also rose and there was much concern
and uncertainty for the future by the respondents in terms of the sales taxes and the upcoming
elections. Then, to close out the week, Coincident index came in better than previous while
Leading economic index number slipped versus the previous reading. As usual too, the Yen
continued its decent overall last week, especially against the US Dollar, with the USD/JPY pair
reaching the important 120.00 level.

The Week Ahead and Other Thoughts

For this week, the final reading of third quarter GDP will be the data to watch. Any signs
of improvement in the data will be a welcoming sign to the markets as the preliminary reading
ws very dismal on all fronts. This data will be released on Sunday (EST US Time). The other
data on Sunday (EST US time) will be trade balance data and consumer confidence data. Then
later on in the week we will get machine tool order and machinery orders data, both important
as they are a reflection of Japans industrial and manufacturing industries, both of which has
performed quite badly over the past few months. Then, speaking of the industrial sector,
October Industrial production numbers will be released on Thursday. But as is the case with
other currencies right now, the big news will be how much lower the Yen will move and if and
when (and the when is more likely) the Japanese government or even the BoJ will step in and
talk it higher some. Members of the government in particularly have already come out and said
that they see the Yen weakening too fast as being a bad thing for the currency and for Japan as a
whole. A repeat of this rhetoric is very likely if the Yen continues its move lower like it has been
doing lately.

China Renminbi; Onshore, Yuan

Overall Picture and Tone
Overall China is weak right now economically and is changing politically and socially. As
for the economic picture, this has been weakening over the past few months. Inflation continues
to move lower which also includes food prices which continue to move lower. As for the
consumer, Consumer Confidence is improving some again after deteriorating over the past few
months while retail sales continue to move lower. As for the business side of things, the services
sector, manufacturing sector and industrial sector as well as business confidence all continue to
weaken overall. As for the employment picture this remains mixed to weak as labor costs
continue to weaken and the number of unemployed persons continues to move higher
highlighting the struggle of the Chinese economy to move from a strictly manufacturing based

economy to more of a services based country in terms of their main revenue and GDP growth
source. As for the housing market, prices continue to move lower as does loan growth putting
pressure on the consumer and the economy as a whole. With lower housing prices the demand
for existing and new housing is slowing and with the real estate market being such a big driver
of growth in China, this is putting a strain on its overall growth. On the government side of
things they continue to work on pushing through reforms to move the economy form a
centrally, government controlled economy, to a more market baed economy. During their recent
Fourth Plenum meeting they highlighted these reforms they are and want to implement
especially focusing on making the law system freer. As for the central bank, they continue to
implement reforms and easing measures to help revive the economy including reserve ratio for
certain banks and other reforms to help rural regions and the real estate market improve
including rate cuts recently. Interest rate liberalization is also one of the main things on the
central banks agenda in terms of reforms they want to implement. Overall then the tone of
China is a more negative one right now as reforms being implemented by the government and
central bank continue to cause weakness in the economy while overall global growth being
weak is causing the manufacturing industry to be weak right now.

Overall Sentiment of the Chinese Yuan (Onshore)

The overall sentiment for China is negative but as the Yuan is controlled by the
PBoC right now, the movements in their are not true in many ways. However, the Yuan
has now been weakening versus the USD over the past few weeks and continued to do
so last week as well.
Last Week in Review
The biggest news last week from China was in the equity markets in the country as they
continued to rise as bets continue to increase that the PBoC will ease further soon to help the
ailing economy. As for data, NBS Manufacturing and HSBC manufacturing data both came in
weaker than previous and the NBS number came in lower than expected as well. Both these
data sets point once again to an ailing manufacturing sector of China. HSBC now sits right at
the level that separates expansion from contraction. Other data though showed improvement in
both the Services and Non-Manufacturing sectors of the economy as both came in above
previous estimates. Overall though the economy in China continues to remain frail, hence the
continued bets of coming easing from the PBoC that is currently being priced into the markets.
The Week Ahead and Other Thoughts:
This week, the big data for the week will come on Tuesday as the CPI numbers for
November are released. The risk for another drop in the number is high in my opinion as if that
does come to pass, we will see yet more bets of easing be priced into the markets in China. The
other data of importance, also being released on Tuesday, will be New Loan data for November
which will give another look at the health of the loan industry in China. Also for the week, on

Sunday night (US EST time) Trade balance data will be released and then on Thursday
Industrial production, retail sales and Urban Investment numbers will all be released and give
more of an indication of how the Chinese economy is doing. Both retail sales and industrial
production numbers have been moving weaker lately so any sign of improvement will be
encouraging though will likely do little if anything in terms of bets of more easing by the PBoC.
Overall perceptions towards China continue to be mixed to negative though as the markets
continue to be more negative towards it while businesses seem to be mixed to more positive.

Euro Area: Euro

Overall Picture and Its Tone
The overall conditions of the Euro Zone are and continue to be very weak and negative.
Overall growth continues to move lower with some countries, including Germany, slipping into
negative growth in the most recent quarter. As for the business side of the economy, the services
and manufacturing and industries sectors all continue to move into weak territory while
business sentiment also continues to deteriorate. As for the consumer, consumption remains low
as seen in continued weakening retail sales data while sentiment also continues to move lower.
The labor market is also very weak with high unemployment, especially youth unemployment,
and wages continue to be low. Trade also remains weak with imports falling while exports are
actually remaining fairly supported. As far as the loan and money sector goes, loan growth
continues to be weak to both businesses and consumers. On the government side of things debt
levels remain very high and there is little ambition from some Euro Zone members to bring
those high debt levels down. In fact the recent budget presented by Italy to the European
Commission showed little in the way of actual reforms to bring down their debt level and was
accepted by the Commission showing once again, that these debt levels in the Euro Zone will
continue to rise until a day of reckoning comes and these countries have to default. Another
thing of continued concern continues to be the political divide between political members and
regions of the Euro Zone especially, now, in terms of how the ECB is allowed to deal with the
low growth and inflation. However disagreement and divide are also continuing to be present
in light of continued rising debt and lack of reforms from different countries, namely Italy and

France. As for the central bank, they continue to remain very dovish, recently implementing a
sort of QE program with the purchases of covered bonds and ABS assets in a bid to help revive
the Euro Zones struggling loan and banking industry in order to therefore revive economic
growth. They also have cut rates quite a good amount since about June of this year with one of
their rates now in negative territory. So overall the tone of the Euro Zone is negative.

Overall Sentiment of the Euro

The overall sentiment for the Euro currency is currently still negative overall.
Last Week in Review
The ECB meeting last week offered no new measures from the Bank to fight low inflation
and low growth. In fact, the ECB sounded a bit hawkish especially in terms of the balance sheet
expansion plans. Seems that there are some in the Bank that are not in favor of the measures
Draghi wants to do both in terms of the balance and in terms of QE. Draghi also said that the
governing council will reassess in the new year as it needs more info to assess before making a
decision on QE. Also the ECB downgraded both growth and inflation for this year and next
though these projections did not take into account the recent fall in oil and so those projections
will likely go even lower. All in all though the markets response was to buy the Euro and buy
quite a bit as the Euro shot up in response to the meeting and the ECBs decision on rates and
no QE. Given the recent negativity towards the Euro, with no new announcement of more
easing measures, QE being the main one, this was seen by the markets as being more hawkish
than the past few meetings. Also it would seem that QE is further off than the markets
originally thought and this has also put a bid in the Euro and altered perceptions of the
participants towards QE occurring. As for data releases last week, Services data cam in lower
than expected and previous overall for the Euro Zone, France, Germany while Italy service data
came in a bit better than expected and previous. Retail sales data for the Euro Zone also came in
pretty good. As for manufacturing data, Germany and Italy data both came in lower than
expected with German manufacturing slipping into contraction territory. France and Spain
manufacturing data came in better than expected and showed continued expansion in both
countrys manufacturing sectors. Then to close out the week, final quarter three GDP for the
Euro Zone came in as expected and previous.

The Week Ahead and Other Thoughts

As for this week, there is a host of data to be released. On Monday, German industrial
production and Euro Zone investor confidence will be released; the former continues to be weak
while the latter has shown some improvement lately. Then on Tuesday, German Trade Balance
data will be released as will France trade balance data. Then on Thursday, German and France
CPI data will be released and then on Friday, Euro Zone employment change and Euro Zone
industrial production numbers will both be released. The big event though for the week will be
the amount of the TLTRO take up by the banks in the Euro Zone. This will be crucial data as the
last TLTRO offered was not so well received by the banks though this was likely due to the bank

stress tests that were to occur soon after. However expectations are now that banks will take up
a bigger amount of the TLTROs being offered this round. If the take up is a good amount, then
this will likely be seen as a positive development for the Euro Zone and hence the Euro and so
we could get yet another round of the Euro going higher.

British Pound
Overall Picture and Its Tone
The overall economic picture is one of strong growth while some weakness has been seen
recently in some sectors. The recent weakness has been seen in particular in the manufacturing
and services industries with the latter being of some concern as the UKs economy is so
dependent on this sector for its growth. Other weakness has been seen in the countrys exports,
though not too surprising there as the Pound continues to be strong overall. Imports also have
fallen some over the last few months. As for the consumer, consumption has moved lower as
seen in recent weakening in Retail Sales data while sentiment numbers have begun to weaken.
This weakness in consumer sentiment has stemmed in part from a weakening housing market
as house prices fall as well as construction activity. As far as inflation goes, this also continues to
move lower as the UK follows the rest of the world (or a large part of it) into a world-wide
deflationary trend, in some respects. This low inflation and weaker growth has also kept the
BoE at bay in terms of them raising rates. They continue to be neutral on that fact and the
market is currently expecting them to keep rates on hold and not raise them until the middle
part of next year at the very least. Another concern of the BoE, which has kept them from
raising rates at this point is the low wage growth. However the labor market as a whole
continues to improve as the number of newly employed continues to rise and the number of
unemployed continues to fall. Overall then the tone of the United Kingdom is neutral to slightly
positive.

Overall Sentiment of Pound Sterling

Overall the sentiment for the Pound Sterling is neutral to negative.

Last Week in Review

Data last week came in mixed overall. Consumer credit rose for the month of October
while both the manufacturing and services sectors showed higher than expected expansion.
Also, house price data showed a continued climb in house prices in the UK during the month of
November. On the negative side of things, construction PMI number came in worse than

expected and previous however not all is bad looking at the internals. Employment and new
orders continued to increase while delivery times are getting longer due to supply issues for
materials. There is also a continued need for more skilled workers, either foreign or domestic.
Overall though the construction sector continues to be strong in the UK and last months
number could very well be weather related. The other event to occur last week was the BoEs
monthly meeting and rate where they left rates and their QE program as before; so no change to
either. Expectations are that the first rate rise from the BoE will be sometime in the middle of
next year, right around the time the US Fed is expected to begin raising rates as well.

The Week Ahead and Other Thoughts

This week there isnt much in the way of data from the UK. Industrial and Manufacturing
production numbers for October will be released on Tuesday. Both sectors continue to remain
strong overall. Then on Wednesday, trade balance data will be released for October. Besides that
though, there is little else in the way of data scheduled for the week.

Canadian Dollar
Overall Picture and Its Tone
The Canadian economy continues to be mixed overall. The positive side of things is that
inflation continues to be relatively stable and high, though this has likely changed now with oil
moving so low. Overall growth too continues to be supported. As for the consumer this is where
some of the weakness lies as spending remains subdued as seen via retail sales data. As for the
business side of things, this remains supported overall. Oil production also continues to
increase but with prices as low as they are, they are not helping the economy any right now. As
for the housing sector, this remains strong with high prices and good building activity both
being supported by low interest rates. As for trade, exports have started to increase some
recently especially as the US continues to bounce back. As for the labor market, this seems to be
improving as new jobs continue to increase in number and the unemployment rate continues to
move higher while wages remain weak, as seems to be norm right now. As for the central bank
they remain neutral to dovish in their tone towards the Canadian economy though they are
starting to sound a bit more optimistic now as the US economy, which Canada is very
dependent on, continues to improve. However, they continue to see recent inflation levels as
being just temporary and still continue to expect weaker growth for a while going forward.
Overall then the tone of Canada as a whole is neutral in relation to the monetary policy in
particular.

Overall Sentiment of the Canadian Dollar

Overall the sentiment for the CAD is currently neutral to negative.

Last Week in Review

The employment lost jobs last week instead of gaining jobs, which is what was expected
would happen.The participation rate and the unemployment rate stayed steady for the month.
Overall though the reading was not that great and does not reflect the recent strength that has
come from the data from Canada recently. Other data for the week was trade balance data
which narrowed more than expected with both imports and exports rising from the previous
month. As for the business sector of Canada, manufacturing PMI came in as expected and still
continues to be in expansion. Also business sentiment improved by a good amount for
November with higher expectations for employment supplier deliveries while prices fell
showing more disinflation. As for events last week the BoC met to make their monthly rate
decision where they left rates alone at 1% which was the same as previous. In their statement
they expect that lower oil and commodity prices will weigh on the economy going forward
while also being somewhat optimistic on exports. The one key part of the statement though is
where they continued to say that inflation was higher than expected but is largely due to
temporary factors. So once again, not seeing any reason to think that inflation is rising in a
meaningful way. Overall then the BoC continues to see that current policy is appropriate for
current economic conditions.
The Week Ahead and Other Thoughts
This week is a slow one for data out of Canada. On Monday we will get housing starts
and building permits data an then on Thursday Capacity Utilization and new house price index
numbers will be released, with the former likely coming in strong given recent manufacturing
PMI numbers were strong as well.

United States Dollar

Overall Picture and Its Tone
The overall picture of the US one of positive growth overall, a central bank that is (very
slowly) turning more hawkish while the government has been pushed to one side in many
respects as it continues to wrangle with its differences and division. As for the economy: it
continues to improve overall though there has been some weakness seen recently, particularly

in the manufacturing sector due to the increasing value of the US Dollar. However this sector, as
well as the industrial and services sectors continue to grow. Business sentiment also remains
strong. The employment sector continues to be good overall with rising employment and falling
unemployment. However problems remain as long term unemployed people continue to
struggle to find jobs and the skills gap continues to widen as fewer and fewer have the skills
necessary to do high tech jobs that are so vital to a nations growth. As for the consumer, they
also remain pretty good though weak wage growth continues to be a problem and consumption
is down some now looking at retail sales data. Sentiment though for the consumer remains
strong overall. Trade continues to do well with both exports and imports strong though the
deficit in the US continues to deepen. As for inflation, this continues to stay steady, but steadily
below the Feds target. As for housing, after a good start this year this sector has weakened
some in the past few months as rate hike expectations continue to be in focus for this industry.
As for rates, and the Fed, in light of the overall US economic picture they have begun to turn
more hawkish in their tone and in their policy recently exiting their QE program completely in a
bid to begin to slowly tighten policy. The tone from the Fed is also changing, though also
changing as they are sounding more optimistic on the economy and jobs and so on but are still
concerned about low inflation. Looking to the government, this part of the US continues to be in
a wrangle with itself failing to pass any meaningful laws or policy changes to help the economy
grow. Recent mid-term elections have given some people some hope as the Republicans now
control both the House and Senate though with a stubborn President at the helm of things, little
will likely change until after presidential elections in two years. However we will have to see.
Maybe Congress will be able to pull a rabbit out of its hat after all. Overall though the tone of
the US economy is neutral to positive overall due to a more optimistic Federal Reserve and
stronger economic growth that continues to get stronger.

Overall Sentiment of the US Dollar

Overall the sentiment for the USD continues to be positive overall.
Last Week in Review
Based on last weeks employment data the US jobs sector is doing very well. NFP
numbers for November came in way above expectations and above 300 thousand while the
previous reading also being revised higher. The internals were good too with average hourly
earnings rising more than expected and average weekly hours worked increasing. The
participation rate and unemployment both stayed steady. So overall a good read on the US jobs
market though it should be mentioned that this number could likely be just a one off event type
of release as holiday hiring was likely a major factor and if that was the case then the market,
and the Fed, will want to see a couple more months of jobs numbers to get a true read on the US
jobs market. But right now things are looking very good indeed for the jobs part of the economy.
As for other data, Factory orders slipped lower than expected and previous and jobless claims
fell less than expected and ADP employment numbers came in less than expected. As for upbeat

data, construction spending rose for October and Non-Manufacturing PMI number for
November came in better than expected. ISM Manufacturing also came in better than expected
though prices paid shoed a steep decline, not a good story for inflation. Labor costs also fell for
the third quarter pointing to possible lower wages going forward though that doesnt seem to
be the case yet if last weeks NFP data was any indication. Also last week we heard from the
usual group of Fed members as they gave their assessment on the US economy and Fed policy.
Fed member Dudley talked about the need to let the economy run slightly hot for a while
before raising rates while Plosser outlined and argued for rate hikes in order to mitigate the
risks of rates being low for too long. On the outside, the Fed seems to be getting closer and more
comfortable with the idea of raising rates, and soon too. On an overall basis though the US
economy seems to be chugging along quite nicely and strongly while the rest of the world
seems to be falling apart at the seams. Makes me wonder though how long the US can go the
way it has been before it is negatively affected by the rest of the worlds problems. I think it
might not be long.

The Week Ahead and Other Thoughts

For this week there is the usual host of data due from the States with the Retail Sales data
on Thursday being the most watched. Expectations too are for a slight negative reading from
previous overall. Other data for the week will be business inventories and export and import
prices, the latter two being gauges of inflation and all this also on Thursday. Then on Tuesday
Wholesale inventories will be released as will small business sentiment numbers and then on
Friday we will get the prelim reading of UoM consumer sentiment. Overall then, itll be the
usual set of data for the markets to chew on to get a further reading on the US economy.