U.S. dollar highlights:
USD remains defensive after President Trump said he has not made a final decision on rolling back tariffs on China’s goods. Trump also said talks were moving “very nicely”, but he would only make a deal with China if it was the right deal. Director of Trade Peter Navarro also said there will be no tariff rollback as part of the trade agreement. Trump’s contradictory comments and last week’s positive developments created false optimism, and this remains the greatest risk for USD. Meanwhile, Federal Reserve Chairman Jerome Powell will deliver his semi-annual testimony to Congress on the economy and monetary policy today. The Fed has already lowered interest rates three times this year and the last move was insurance due to increased trade tensions. Markets do not expect another cut next month and will be monitoring plans for 2020.
Canadian dollar highlights:
CAD under pressure after last month’s soft jobs report. Markets will focus on the November unemployment report for confirmation if the economy is slowing. The next policy decision is December 4; meanwhile, Senior Deputy Governor Wilkins speaks on November 19 and Governor Poloz will speak on November 21. Positive trade developments and higher oil prices have supported CAD the past month, however, the central bank is under pressure to follow the Fed and cut rates. Phase one of the trade deal has not been signed yet and both sides have reduced tensions. No trade deal means less demand for oil and CAD lower.
EUR weaker as President Trump will announce a decision on non-North American auto tariffs today. The European Union said they will retaliate with their own tariffs if any duties are applied to cars coming from European automakers. Germany is the Eurozone’s largest economy and has been affected the most from Brexit uncertainty and trade tensions; meanwhile, the auto tariff threat will also impact the slowdown and cause EUR lower.
British pound highlights:
GBP stable as Boris Johnson may secure a majority government after the Brexit party will not contest seats won by the Conservatives. Moody’s rating agency downgraded the U.K. outlook to negative (due to Brexit uncertainty). Meanwhile, the unemployment rate for September dropped to 3.8% (from 3.9% previously in August); however, wages growth was weaker than expected at 3.6% year over year (versus expected 3.8% gain). All eyes on October’s Inflation Rate available today.