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Canadian dollar update – Tuesday December 24, 2019. Slow start to Q4 putting pressure on Bank of Canada.

Albert Edwards
by Albert Edwards on December 24, 2019


U.S. dollar highlights:

USD firm after Durable Goods Orders for November dropped 2% monthly (previously 0.2% growth). However, new home sales improved 1.3% last month (after dropping 2.7% previously). Low mortgage rates continue to support the housing industry. Meanwhile, China stated they will reduce some import tariffs on January 1, 2020 for 850 goods. Markets have reacted positive after President Trump’s impeachment as equities reached a new high recently. Initial Jobless Claims for last week and Crude Oil stocks available on Thursday and Friday.

Canadian dollar highlights:

CAD defensive after the economy contracted 0.1% monthly in October. Markets expected 0.1% growth (after expanding 0.1% in September). This was also the first decline in eight months with the manufacturing sector affected the most by -1.4%. After disappointing retail sales data for the same month, oil prices will be vulnerable. Meanwhile, the Bank of Canada may be forced to boost the economy if economic data continues to disappoint. President Trump said a preliminary deal with China would be signed soon and this provided CAD some support. Manufacturing Index for December available on Thursday and Bank of Canada Deputy Governor Carolyn Wilkins speaks next week.

Euro highlights:

EUR stable on lower trade tensions and positive developments regarding Phase One. During 2019, the EUR has been primarily weaker and defensive due to trade wars, Brexit uncertainty, and the global economic slowdown. The European Central Bank has limited monetary policy tools and this has also affected the EUR. The focus will be on the governments on 2020 to help boost the economy and markets are waiting for Germany to deliver some form of fiscal stimulus. 

British pound highlights:

GBP defensive on increasing concerns about the Conservative Government’s hard line on Brexit talks.  GBP continues to drop after rebounding from the majority election results. A hard Brexit will also put more pressure on the Bank of England to cut interest rates.