Eurozone Industrial Orders Improve; Canadian CPI Drops

USD mixed ahead NY open. While the AUD and NZD trade above their yesterdays highs, EUR, GBP and JPY failed to reach new highs. CAD is being sold after inflation figures came out much lower. Canadian Retail Sales are next.

The common currency continues to consolidate after it gained nearly 300 points yesterday. Economic data releases came out mixed - German Ifo Business Climate index for July decreased to 112.9 from 114.5. However, Eurozone Industrial New Orders in May came out much higher than expected at 3.6% from previous contraction by 0.1%. This is the best result since October 2010 and yet the Euro was not able to rally. Reports yesterday said that the move up was fueled by leveraged players while real money funds were seen selling into the rally.

Canadian June Consumer Inflation figures came out much weaker than expected sending CAD lower against its trading counterparts. The headline CPI came out at -0.7% from previous increase of 0.7% and core CPI printed -0.6% from +0.5%. Right after the release USDCAD touched the 0.95 figure while an hour before the release it traded around 0.9440. Only on Tuesday, the BoC left rates unchanged at 1% but the CAD gained on expectation of rate hikes. With the annual CPI dropping from 3.7% to 3.1% within one month BoC may not be in a hurry to increase rates.

Fridays New York session has only one data release. At 8:30 am ET May Canadian Retail sales are expected to drop to -0.3% from previous +0.3%. Core Retail sales are expected to grow by 0.2% from unchanged reading in April.

Treasury Secretary Tim Geithner will meet with Ben Bernanke and William Dudley this morning. While the topic of this meeting has not been disclosed, it is likely that emergency measures in the event of US debt default will be discussed. Charles Plosser, Philadelphia Fed president, told Reuters earlier that the treasury is engaged in talks with the Fed. Such meetings do not inspire confidence that a debt-ceiling deal is near.

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