U.S. dollar highlights:
USD lower after the Phase One trade deal announced last Friday, the USMCA and Conservative Party victory from the U.K. elections. President Trump cancelled new levies and cut September tariffs on $120 Billion worth of Chinese imports in half (from 15% to 7%). However, the Phase One trade deal with Beijing has not been signed yet, and markets are concerned about China fulfilling their commitment. China agreed to change how it deals with intellectual property rights and stop forcing American companies to share their technology. Meanwhile, Mexico’s trade chief Jesus Seade will meet with Robert Lighthizer to review the language in the USMCA legislation on maintaining labour standards. Markets will focus this week on trade news and GDP Growth Rate for Q3 (available Friday).
Canadian dollar highlights:
CAD stronger after risk-on market tone returns. A Phase One trade deal supports CAD with higher demand for oil. Existing home sales for November increased 0.6% (previously 0.0%). Markets will focus this week on the Consumer Prices report for November (available Wednesday) and Retail Sales for October (available Friday).
EUR defensive after the Bundesbank forecasts the German economy stalling in Q4 (due to weak exports). Eurozone Manufacturing contracted to 45.9 reading (from 46.9) with only France at the 50.0 level. However, the Services reading improved to 52.4 (from 51.9 previously). The Phase One trade agreement and Tory victory from last week’s U.K. election reduces risk and will help recover manufacturing activity. Markets will focus this week on the central bank’s Chief Economist Philip Lane’s speech tomorrow, President Christine Lagarde’s speech and November’s Inflation Rate (available Wednesday).
British pound highlights:
GBP stronger after the risk of a no-deal is removed and the Brexit legislation will be back to Parliament within the next week. After Boris Johnson’s Conservative Party victory last week, the Prime Minister plans to “get Brexit done” by the January 31, 2020 deadline. Political uncertainty ahead of the election affected GDP expansion in Q4; meanwhile, manufacturing and services also stalled. The economy should rebound in Q1 (due to reduced global risk) but uncertainty over future trading relations with the European Union may put pressure on GBP. Markets will focus this week on the Unemployment Rate for October today, Inflation Rate for November (available Wednesday) and the Bank of England’s interest rate decision on Thursday.