U.S. dollar highlights:
USD defensive and begins 2020 over 6% lower from one year ago. The dollar index also remains low and Consumer confidence for December was only 126.5 reading (lower than expected 128.2 and previously 126.8). President Trump said the Phase One deal with China will be signed on January 15 at the White House. Markets are confident in global growth and this has returned risk-on. The Phase One agreement has reduced demand for USD as a safe haven. The Federal Reserve will remain on hold and this may result in higher equities in 2020.
Canadian dollar highlights:
CAD stronger on higher oil prices and increased confidence the global economy is recovering. CAD reached a 14-month high against USD after manufacturing activity in China expanded again last month. All eyes on Bank of Canada Deputy Governor Carolyn Wilkins’ speech tomorrow. Governor Stephen Poloz will speak next week Thursday. The central bank was dovish in 2019, however, they may be under pressure to cut rates in 2020 in order to maintain the 2% inflation target. Poloz will also be resigning in June and Wilkins is a strong candidate.
EUR firm to start 2020 after positive trade developments between U.S. and China. EUR support has mainly been due to USD weakness the past week. In addition, Eurozone Manufacturing Index in December increased to 46.9 reading (from 45.9 previously in November). Germany’s economy is also improving to ease market concerns about a recession. Meanwhile, central bank President Christine Lagarde is encouraging more fiscal stimulus and may cut interest rates this year to boost the economy.
British pound highlights:
GBP firm after parliament passed Prime Minister Boris Johnson’s Brexit bill. The possibility of a no-deal Brexit at the end of 2020 and concerns about a disorderly exit will keep GBP under pressure. Johnson plans to leave the European Union with or without a trade deal by the end of this year. Meanwhile, the European Union may need to extend the deadline for trade talks.