Dollar bullish news does little for the US dollar. To our surprise, the
market completely ignored Canada's admission to underreporting US imports in
the month of November. If you recall, the US trade deficit widened to a new
record in November. Such an error by Canada would mean that deficit was much
narrower than expected. In fact the US Commerce Department said that the
Canadian error could add as much as 0.5% to US Q4 GDP, which could boost
Friday's release to 3.6%. Taking this and the sharp rise in foreign inflow
as reported by the TIC data during the month of November in account, we are
left with a potentially very positive dollar development. Meanwhile, the
other economic data released today was equally positive. Personal income
climbed a whopping 3.7% in the month of December, which was the fastest pace
of growth on record; the government began keeping records in 1959. A
one-time $32.6 billion dividend payment by Microsoft accounted for most of
the increase, as income growth net of the dividend is only 0.6%. Generally
it is rare for one company's dividend to have such a significant impact on
personal incomes, but Microsoft is one of the most widely held stocks in the
US and in fact, the payout was more than the federal income tax rebates
forked out by Uncle Sam in the summer of 2001. Chicago PMI jumped to 62.4
from an upwardly revised 61.9 in January. The market had actually expected
the index to dip, but a rise in new orders, production, employment and a dip
in prices paid helped to boost the index. This suggests that tomorrow's ISM
survey could also surprise on the upside.
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If you guys keep screwing with US economic data, the next time there's
another errant friendly-fire incident, it might happen just North of our
border...instead of in Afghanistan.