U.S. dollar highlights:
USD stronger after the Unemployment Rate dropped to 3.5% last month (better than expected 3.6% and previously 3.6% in October). The economy created many more jobs than expected to support the Federal Reserve’s stance of keeping interest rates on hold. The Fed already cut rates three times this year to boost the economy and this has worked. In addition, non-farm payrolls increased by 266K jobs last month (versus 180K expected) and the manufacturing sector is recovering. Job growth increased the most in ten months to ease concerns about a recession. Markets are still focused on trade talks with China and optimistic Phase One will be signed before the 2020 elections. All eyes this week on the Consumer Prices report for November and the Fed Interest Rate decision on Wednesday.
Canadian dollar update:
CAD weaker after the economy lost 71K jobs in November and the Unemployment Rate increased to 5.9% (versus 5.5% expected). This was the highest jobless rate in more than one year and CAD suffered because a gain of 10K jobs was forecast. After the Bank of Canada’s hawkish stance regarding monetary policy last Wednesday, CAD reached a four-week high; however, a surprise drop in domestic jobs increased expectations of a rate cut in Q1 2020. Meanwhile, oil prices increased after OPEC agreed to extend output cuts by 500,000 barrels per day in the new year. All eyes this week on the Bank of Canada Governor Stephen Poloz’s speech on Thursday.
EUR declined after German industrial output decreased in October. The Eurozone’s biggest economy continues slowing and suffered a drop in production of capital goods. After narrowly avoiding a technical recession in Q3, Germany remains vulnerable due to Brexit uncertainty. EUR is also vulnerable to trade talks between U.S. and China as comments from President Trump last week that a deal may not get done until after the 2020 elections increased risk sentiment. All eyes this week on the European Central Bank’s Interest Rate decision and new President Christine Lagarde’s press conference on Thursday.
British pound highlights:
GBP stable on expectations that the Conservative Party will win the election on Thursday. The latest polls indicate Boris Johnson still has a comfortable majority and markets expect his Brexit bill to pass through parliament. However, a minority government will keep GBP defensive and under pressure because the European Union stated they will not extend the deadline again past January 31, 2020. GDP for October available tomorrow (previously 0.9% yearly). All eyes this week on developments surrounding the general elections.