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Canadian dollar update – Monday December 23, 2019. Easing trade tensions increasing oil demand and growth outlook.

Currency-Market-Update-Monday-1
Albert Edwards
by Albert Edwards on December 23, 2019

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD firm as Treasury yields rise while Q3 GDP was 2.1% quarterly (as expected and previously 2.0%). The economy is showing signs of strength and expansion to end the year. A strong labour market continues to support GDP; meanwhile, consumer and business spending also improved. Markets remain focused on the Phase One trade agreement as China still needs to sign. President Trump’s impeachment has not affected USD currently, however, gold prices are higher due to increased political uncertainty.

Canadian dollar highlights:

CAD defensive after retail sales in October dropped 1.2% monthly and also decreased 0.6% yearly. Markets expected a 0.5% increase; however, this unexpected decline improved the possibility the Bank of Canada may cut interest rates in 2020. Weaker sales in automobiles, car parts dealers, building material and garden equipment all led to the drop.  GDP for October expecting 0.1% monthly today.

Euro highlights:

EUR vulnerable as markets respond to Trump’s impeachment. All eyes will be on the European Central Bank and new President Christine Lagarde. The Eurozone suffered from Brexit uncertainty in 2019 and the central bank may have to follow the Federal Reserve and cut interest rates in Q1 2020. Producer Prices for November and Consumer Prices for December available next week.

British pound highlights:

GBP defensive as markets are concerned about how Britain will leave the European Union. The House of Commons will vote on Prime Minister Boris Johnson’s Brexit bill. Britain has set December 2020 as a hard deadline to reach a trade agreement with the European Union. Johnson has increased the risk of a hard Brexit and this has caused GBP to retreat to the levels before the Conservative victory.