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Canadian dollar update – Friday December 20, 2019. Risk-on as House votes to impeach President Trump for abuse of power.

Albert Edwards
by Albert Edwards on December 20, 2019


U.S. dollar highlights:

USD stable after the Philadelphia Fed manufacturing index dropped to 0.3 in December (from 10.4 previously and the lowest in six months). In addition, the current account deficit narrowed to $124.09 Billion USD in Q3 (versus $121 billion deficit expected). Low investment and a slowdown in global trade continues affecting the manufacturing sector, and markets are hoping for a recovery with the Phase One trade agreement. Meanwhile, House Speaker Nancy Pelosi and Representatives charged The President with high crimes and misdemeanors; however, markets have already decided there is zero chance the Republican controlled Senate will remove President Trump from office.

Canadian dollar update:

CAD firm after the revised ADP employment report for November confirmed 30.9K jobs added (versus 22.6K initially). After the unemployment report in November disappointed and was the highest since September 2018, this revision confirmed five straight months of job gains. However, with General Motors closing this week, another 2,600 jobs will be lost so the jobless rate may increase next month, and CAD will be under pressure. Inflation remains on target and the Bank of Canada does not see the need for a rate cut yet to boost the economy. All eyes on the Retail Sales report for October (expecting 1% increase yearly).

Euro highlights:

EUR defensive after President Trump’s impeachment adds to the Phase One trade deal uncertainty. The world’s two biggest economies have not signed the trade agreement yet and the possibility of a hard Brexit also putting pressure on EUR. Meanwhile, manufacturing activity is near expansion with business confidence increasing. All eyes on the European Central Bank general council meeting and Chief Economist Philip Lane’s speech.

British pound highlights:

GBP weaker after the Bank of England kept interest rates unchanged at 0.75% (as expected). The central bank said that if the economy performs according to projections, then a rate cut is possible to maintain inflation. Also, Retail Sales for November decreased to 1% yearly (from 3.1% in October and lower than expected 2.1% gain). GDP Growth Rate for Q3 expecting 1.3% yearly expansion today. All eyes on Prime Minister Boris Johnson as markets are concerned the U.K. may leave the European Union without a trade agreement.