U.S. dollar highlights:
USD stable as markets continue to focus on the Phase One agreement. Both sides continue talking and there is still optimism for a truce. During the past two weeks, President Trump signed a bill to support protesters in Hong Kong and the House imposed sanctions on Chinese government officials for human rights abuses against Muslims. Markets were concerned that trade talks would break down after China was disappointed, however, both sides continue negotiating. Treasury Secretary Mnuchin and Trump both said that talks are going well. Initial Jobless claims for last week dropped to 203K (from 213K previously) and Factory orders for October increased 0.3% (from -0.8% previously in September). Unemployment Rate for November expecting 3.6% today.
Canadian dollar highlights:
CAD remains strong after the Bank of Canada’s policy announcement and positive outlook on the economy on Wednesday. Oil prices are firm to support CAD, but trade risks still exist. Unemployment remains low and inflation is on target while global growth is recovering. Deputy Governor Lane warned that one of the key risks for the central bank is high levels of household debt. Markets will focus on the OPEC meeting (ending today) to determine if further cuts are necessary and this will give CAD more strength. OPEC members agreed to cut only 500.000 barrels per day in Q1 2020. Unemployment Rate for November expecting 5.5% today.
EUR remains vulnerable and weaker after Eurozone Retail Sales for November was only 1.4% growth year over year (versus 2.2% expected). Markets will now focus on the European Central Bank’s first policy update with new President Christine Lagarde. An interest rate cut is expected (and already priced in) if the central bank moves the inflation target back to 2% (as expected). Lagarde will try to convince policymakers that the economy needs more fiscal stimulus because they have little monetary policy remaining.
British pound highlights:
GBP firm after election polls show the Conservatives lead at 10 points. Markets remain optimistic a Brexit deal will be finalized with a majority government with six days remaining until the election. Prime Minister Boris Johnson’s Brexit agreement will remove the risk of a no-deal. October GDP and the bank of England’s Financial Stability report available next Tuesday.