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Canadian dollar update – Monday November 25, 2019. All eyes on trade developments, oil prices and Fed Chairman Powell.

Currency-Market-Update-Monday-1
Albert Edwards
by Albert Edwards on November 25, 2019

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD remains firm after China announced they are willing to resolve core trade concerns last week and invited top U.S. negotiators for more talks. After negotiations were deteriorating, China said it will raise penalties on violations of intellectual property rights to address one of President Trump’s main issues. Trump said a trade deal with China is “potentially very close”. Trump also said the ongoing Hong Kong protests are “a complicating factor” in trade talks and that he helped Chinese President Xi Jinping from a violent crackdown. Federal Reserve Chairman Jerome Powell speaks tomorrow and markets will focus on any clues for monetary policy and if another rate cut is possible. GDP Growth Rate for Q3 available on Wednesday (previously 2% expansion in Q2 and expecting 1.9%).

Canadian dollar highlights:

CAD stable on higher oil prices and the Bank of Canada Governor’s hawkish comments last week. Stephen Poloz said he believed current monetary policy is appropriate and the economy is strong. Markets have reduced the chances of a rate cut in Q1 2020 to give CAD more support. The next interest rate decision is Wednesday December 4. Oil prices increased last week to the highest in nearly two months after OPEC said they will extend output cuts until the middle of 2020; however, concerns over trade talks could affect production. Retail Sales in September decreased 0.1% monthly (from 0.1% increase previously) and only increased 1% yearly (from 1.3% in August). All eyes on GDP Growth Rate for Q3, September GDP and October Producer Prices available Friday.

Euro highlights:

EUR weaker after the Composite Purchasing Manager’s Index for November dropped to a 50.3 reading (from 50.6 in October). Economic health in the Eurozone is deteriorating as the 50.0 level represents contraction. Meanwhile, the Manufacturing Index continues to suffer at 46.6 (from 45.9 previously). Eurozone business growth slowed last month and German business conditions also continued declining to put more pressure on EUR. All eyes on the November Unemployment Rate and Consumer Prices this week (available Friday).

British pound highlights:

GBP weaker after the U.K. Purchase Managers Indexes confirmed the manufacturing and services sectors declined in November. Business investment, labour, and wages are also dropping before the December 12 election. Meanwhile, the Labour Party plans to raise taxes and rationalize infrastructure; however, Prime Minister Boris Johnson’s Conservatives continue leading the polls. With less than three weeks until the election, markets remain optimistic Johnson will win a majority and his Brexit deal finalized.

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