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Canadian dollar update – Monday December 30, 2019. USD lower on returned risk-appetite and trade optimism.

Currency-Market-Update-Monday-3
Albert Edwards
by Albert Edwards on December 30, 2019

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD has retreated the past week due to pressure from higher oil prices and markets have restored confidence in global growth. After China’s industrial firms increased at the fastest pace in eight months in November, this is a positive affect from the Phase One trade deal. Optimism over a trade truce and an improving global economy sent Wall Street to record highs last week and increased risk appetite. All eyes this week on the latest Federal Open Market Committee meeting minutes available Friday.

Canadian dollar highlights:

CAD firm due to higher oil prices after U.S. Crude inventories decreased by 7.9 million barrels last week. Easing trade tensions also supporting CAD as markets are confident the Phase One deal will be finalized soon. President Trump said a deal will be signed shortly and China’s finance ministry said they would lower tariffs on frozen pork, avocado and some types of semiconductors in 2020.  Markets will also monitor OPEC as they may consider lowering output cuts next year. All eyes this week on the Bank of Canada Governor’s first speech of 2020 on Friday.

Euro highlights:

EUR remains defensive despite optimism about improved trade relations. The other key factors affecting EUR for Q1 2020 are: the Brexit deadline on January 31 and central bank monetary policy. Another Brexit extension for the United Kingdom may put Germany into a recession; meanwhile, new European Central Bank President Christine Lagarde is under pressure to boost the economy and reach the inflation target of 2%.

British pound highlights:

GBP still under pressure while markets are not confident Britain will finalize a trade deal with the European Union on time. After Prime Minister Boris Johnson’s Conservatives won a majority government, all of the GBP strength from the Tory victory was reversed due to fears of a hard-Brexit. However, European Commission President Ursula von der Leyen said they may need to extend the deadline beyond January 31.

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