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Canadian dollar update – Friday January 24, 2020. CAD weaker after dovish BoC while EUR and GBP steady.

Canadian dollar update – Friday January 24, 2020. CAD weaker after dovish BoC while EUR and GBP steady.
Albert Edwards
by Albert Edwards on January 24, 2020

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD stronger as risk-off market sentiment is causing safe-haven demand. China announced travel restrictions to contain the spread on the coronavirus. As a result, USD reached the highest level in one month. Meanwhile, Initial Jobless claims for last week was 211K (previously revised to 205K and lower than expected 215K). Crude oil stocks decreased by 0.405 million barrels. All eyes on the Manufacturing and Services Price Managers Index reports for January available today.

Canadian dollar highlights:

CAD lower and defensive after the Bank of Canada left interest rates unchanged at 1.75% (as expected). However, Governor Poloz said growing slack in the economy threatened to dampen inflation pressures. Meanwhile, household debt levels remain a vulnerability to the economy. The central bank also dropped reference to monetary policy being “appropriate” and markets have now priced in a 25% risk of a rate cut this year. Crude oil prices will continue to support CAD the rest of month. Retail Sales for November expecting 0.4% increase monthly and 1% yearly today.

Euro highlights:

EUR weaker after the European Central bank left interest rates unchanged at -0.5% (as expected). President Christine Lagarde announced the start of a strategic review and accommodative policy is needed to support inflation. EUR dropped lower after Lagarde said she will also consider the effects of climate change, which may include additional monetary stimulus. EUR remains vulnerable after Lagarde’s cautious tone and Germany escaped a technical recession. The Quantitative Easing program is currently at €20 billion per month and will continue until inflation improves. All eyes on the Manufacturing and Services Index reports for January available today. 

British pound highlights:

GBP stable after the Brexit bill passed through Parliament and the House of Commons overturning all the amendments. The U.K. will leave the European Union on January 31 as expected. Strong employment in November overshadowed last’s week’s weak retail sales. The Bank of England remains under pressure to cut interest rates next week. The Manufacturing Index for January expecting a 48.9 reading today (from 47.5 previously).