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Canadian dollar update – Friday January 17, 2020. Retail sales recovers USD while EUR advancing.

Albert Edwards
by Albert Edwards on January 17, 2020

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD vulnerable after the Phase One trade deal signed on Wednesday, however, Retail sales improved 0.3% in December (as expected and the third consecutive month of increases). Meanwhile, core sales improved 0.5% (versus 0.4% expected) to provide more support. November’s report was also revised to 0.3% as consumption continues to boost the economy, but the manufacturing sector is still slow. Consumption is approximately 70% of the U.S. economy. Weekly unemployment claims dropped to 204K last week (lower than expected 216K). Housing starts and building permits for last month will be available today. Markets will now focus on the GDP report for Q4.

Canadian dollar highlights:

CAD stable as lower oil prices overshadow trade optimism. Markets are focussed on the Bank of Canada’s next monetary policy decision next week. Governor Poloz is expected to remain dovish, however, a decline in home sales and new listings last month is putting the central bank under pressure. Consumer prices, manufacturing and retail sales reports also available next week.

Euro highlights:

EUR stronger after Germany’s inflation rate for December increase by 1.5% yearly (higher than expected). Risk-appetite was low after the Phase One trade deal was signed as markets are waiting for the end of tariffs on imports. EUR support has also been due to weaker USD the past week. European Central Bank President Christine Lagarde encouraged more coordination between policy makers to help boost the economy. The Eurozone has experienced weak manufacturing during the past year (especially Germany).  Inflation rate for December expecting to decline 0.3% monthly and improve 1.3% annually today.

British pound highlights:

GBP firm after markets priced in a 57% chance of a 25bps rate cut from the central bank this month. After weak inflation data and a fourth policymaker supported a rate cut this week, GBP dropped. However, current Bank of England Governor Carney may choose to allow his successor Andrew Bailey to make the next monetary policy decision in March. Retail sales for December expecting 0.5% gain monthly and 2.6% yearly.

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