U.S. dollar highlights:
USD weaker due to uncertainty regarding the Phase One trade deal with China and Brexit. Building Permits increased 1.4% and Housing Starts improved 3.2% in November. Lower mortgage rates continue to support the housing market and economy. Equities surged to all-time highs last week after positive trade developments with China. Manufacturing Production increased 1.1% monthly (from -1.7% previously) and Industrial Production also improved 1.1% year over year (from -1.3% in October). The Federal Reserve remains dovish and won’t hike interest rates again until inflation is higher. Monetary policy, fiscal policy and the economy are all strong and may increase consumer spending in 2020. Core Inflation is currently at 1.5% yearly, meanwhile Chairman Powell wants 2% or above.
Canadian dollar highlights:
CAD stronger after Consumer Prices increased 2.2% yearly in November (from 1.9% previously). Core Inflation remained unchanged at 1.9% annually. However, Manufacturing shipments contracted by 0.7% in October and this represented the second straight month of decline. CAD support the past week has been due to higher oil prices, central bank monetary policy and the Phase One trade deal. In addition, General Motors will end production in Oshawa, and this will affect 2.600 workers without a job. The USMCA is expected to receive Congressional approval this week. Manufacturing Sales decreased 0.7% in October (versus 0% expected and previously -0.2%).
EUR stable and trending higher after the European Central Bank policymakers were dovish on Tuesday. Renewed concerns about a hard Brexit also affecting EUR. Estonia’s central bank chief Madis Muller said some flexibility regarding inflation could be acceptable. Meanwhile, business confidence in Germany increased for the fourth straight month as the Eurozone’s largest economy continues to avoid a recession. Inflation Rate for November was 1% year over year and Core improved to 1.3% (previously 0.7% yearly and 1.1% Core).
GBP weaker and under pressure after Prime Minister Boris Johnson set a new deadline to prevent another Brexit extension beyond January 31, 2020. Johnson will also write into law that the U.K. will leave without extending the transition period. GBP suffered its worst decline in 13 months on fears of a hard-Brexit. All eyes on the Bank of England’s interest rate decision today (no changes expected). Markets are now pricing in a rate cut for June 2020.