U.S. dollar highlights:
USD weaker after a trade deal with China is unlikely to be done by end of this year. China invited U.S. trade delegation to Beijing for another round of talks which will be vital to Phase One of the agreement being finalized. China’s main issue remains removing and rolling back tariffs; meanwhile, President Trump warned that he is prepared to impose more tariffs. The Senate passed a bill to support the Hong Kong protesters and this could affect negotiations as China said they will retaliate and “take string countermeasures”. Trump also said he will not do a deal if there is any violence or if the matter is not treated properly and humanely”. Markets remain optimistic Trump will delay the tariff hike scheduled for December 15 even if a deal is not completed.
Canadian dollar highlights:
CAD stronger after Bank of Canada Governor Stephen Poloz said monetary conditions are “about right” and the economy is in a good place overall. Markets interpreted this as the central bank is unlikely to consider cutting interest rates; however, all eyes on September’s Retail Sales report today (expecting -0.1% monthly and 1.3% year over year). In addition, OPEC said they are unlikely to extend output cuts until June and this caused oil prices higher to support CAD. Meanwhile, private businesses lost 22.6K last month (after hiring a revised 26K workers in September).
EUR weaker and under pressure due to risk-off sentiment and the central bank outlook for growth is weak. The economy is suffering, and markets expect more monetary policy. Vice president Luis de Guindos said a recession in the Eurozone is “very improbable”. In September, the central bank cut rates to a record low -0.5% and more cuts are already priced in for 2020. EUR remains vulnerable to drop lower unless a trade deal signed between the world’s two biggest economies and Brexit finalized.
British pound highlights:
GBP remains defensive to the December 12 election polls and campaign announcements. The Manufacturing Index report for November is expecting a 49.0 reading today (from 49.6 in October and 48.3 in September). Due to Brexit uncertainty, the manufacturing sector continues to contract and employment also declining. Meanwhile, the Services Index report is expecting a 50.0 reading (after increasing to 50.0 in October and 49.5 in September). The economy narrowly avoided a recession in Q3.