U.S. dollar highlights:
USD under pressure as the outlook for Phase 1 trade talks is currently negative. China is disappointed that President Trump would not include any tariff rollbacks. The People’s Bank of China also cut its reverse repo rate for the first time in four years by 5bps to boost the economy. Election campaigns in the U.S. are ramping up, however, China may continue waiting for the result (and the impeachment hearings to conclude). Trump has more incentive to resolve the trade war because this was one of his promises. Markets are focused on the latest Federal Open Market Committee meeting minutes available tomorrow. Some Fed members opposed a rate cut previously and the economy is strengthening so risk appetite continues. Housing Starts and Building Permits for October are both expected to decrease today.
Canadian dollar highlights:
CAD remains stable as trade developments continue to fluctuate. Oil prices remain firm to keep supporting CAD. Markets are focused on Wednesday’s Inflation report for October (expecting 1.9% Core). Lower gasoline prices are currently affecting consumer spending. The Bank of Canada has remained dovish and patient, however, an interest rate cut is now possible in 2020. Currently a 19% chance of a rate cut next month, however, the odds of a cut for Q1 2020 have increased to 43%. The central bank will also pay attention to the Retail Sales report for September available on Friday.
EUR weaker after central bank Chief Economist Philip Lane suggested leaders of many European countries need to coordinate their fiscal policy to boost the economy. After Germany refused to add any fiscal stimulus to their slowing economy, EUR is under pressure. Germany is currently avoiding a technical recession, however, all eyes on Q4 data. Lane also noted that a disorderly Brexit would impact Ireland most. The European Central Bank and the Bank of England are both under pressure to lower interest rates. Any Brexit optimism will strengthen EUR.
British pound highlights:
GBP stronger after Prime Minister Boris Johnson said he has universal support by his Tories over his Brexit deal. Johnson is seeking a majority government after calling for a snap election next month. Current poll results show 45% support for the Conservatives and 28% for the Labour party. All eyes on the first political party debate today.