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Canadian dollar update – Monday December 2, 2019. USD lower on trade uncertainty and all eyes on BoC monetary policy.

Albert Edwards
by Albert Edwards on December 02, 2019


U.S. dollar highlights:

USD lower as trade uncertainty is increasing risk appetite. Markets are preparing for China’s response after President Trump signed a bill last week to support the protesters in Hong Kong. If China retaliates, USD may continue weaker and the chances of Phase One getting signed lowered. The U.S economy is recovering as the trade war continues over one year; however, China’s manufacturing sector is suffering as the past two months confirmed contraction. This week’s focus for USD is the November jobs report on Friday (expecting 3.6% and same as October).

Canadian dollar highlights:

CAD defensive after lower oil prices, increased trade tensions and Q3 economic growth slowed as expected. Markets are worried about a trade deal after geopolitical events in Hong Kong. September GDP was 0.1% (as expected and same as August); meanwhile, Q3 GDP Growth Rate was 0.3% quarterly (from 0.9% in Q2) and 1.3% annualized (previously 3.5%). This week’s focus for CAD is the Bank of Canada’s Interest Rate decision on Wednesday (previously 1.75% and no changes expected). Governor Poloz has remained dovish, but markets have already priced in a rate cut for Q1 2020. Deputy Governor Timothy Lane also speaks on Thursday.

Euro highlights:

EUR weaker after Eurozone inflation accelerated faster than expected in November, but still below the central bank target of 2%. Consumer Prices increased 1% yearly (previously 0.7% in October) and Core inflation was 1.3% (from 1.1%). Meanwhile, the Unemployment Rate for October lowered to 7.5% (as expected and previously 7.6% in September). This week’s focus for EUR: Central Bank President Christine Lagarde speaks today; October Retails Sales available on Thursday; and Q3 GDP Growth Rate also on Thursday. The European Central Bank’s next policy meeting is December 12 (no changes expected).

British pound highlights:

GBP stable as markets wait for any major political development and the result of the election next week. GBP strengthened last week after the YouGov poll forecasts that Prime Minister Boris Johnson’s Conservative Party would win the election with its largest majority in parliament since 1987. This week’s economic focus for GBP is the Bank of England’s Financial Policy Committee meeting tomorrow.