Risk sentiment continued higher despite a weaker than anticipated Chinese trade balance. The trade surplus, expected at $26.9B, disappointed with a print of $20.0B. Though the trade surplus declined from the prior $28.7B, the key takeaway is that imports grew by more than expected, adding to recent evidence that global slowdown may not be as dire as previously thought. This is especially supportive for the Aussie as China is Australia’s largest trading partner. Recall that the recent rise in Australia’s 2Q GDP was largely attributed to China’s demand for iron ore as Australian 2Q exports climbed 5.6% to contribute 1.1 percentage points to GDP.

In line with the return to risk, safe haven currencies have come off the boil. Swissy’s attempt at parity with the dollar has stalled. USD/CHF reversed higher to break a resistance level around 1.0170 and is on its way to punching through the upper boundary of its recent range around 1.0250. If it can do this, then the next level of resistance is 1.0310. USD/JPY broke above 84.00 at the start of the session. However, a large upward revision to Japanese GDP in the second quarter to +1.5% on an annualized basis, up from +0.4%, has made it harder for the dollar extend gains. The GDP figures show that despite a strong yen, the economy is not only showing growth, but growth that has picked up since Q1. The Nikkei 225 advanced by +1.55%.

Gold has bucked the trend of other safe haven assets and is trading higher on increased demand from several Asian central banks. Most notably, the IMF reported that Bangladesh’s central bank purchased 10 metric tons of bullion.

The euro has moved from session lows around $1.2645 to near $1.2750 where it faced resistance into its 21-day sma. Stronger French industrial production (+0.9% vs. expected +0.7% and prior -1.7%) in July helped the single currency gain some upward traction. The pair remains stuck in a tight range over the past few days as investors search for direction.

Cable shot above $1.54, reversing yesterday’s losses, there was no real reason for the break, but investment banks did see retail interest in buying GBP/USD around 1.5300/50 level, which could have propelled the move higher. The weaker tone in economic data releases on Friday did not stop its ascent.
Producer prices fell in August. Input price growth slowed to 8.1% annually, down from 10.8% in July. Output prices also slowed to 4.7%, down a touch from 5.0%, which eased fears of excess pressure in the inflation pipeline.

The Canadian employment report for August was somewhat mixed. Though the net change in employment rose by more than the expected +30.0K as it climbed to +35.8K from the prior -9.3K, the unemployment rate unexpectedly increased to 8.1% from the previous 8.0%. The initial reaction from the market was to buy the Loonie and we saw USD/CAD drop below 1.0300, however the pair is now trading back above the figure.

On the data front for the NY Session is U.S. wholesale inventories for July due at 1000EDT.