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Canadian dollar update – Tuesday November 26, 2019. Oil prices fall on lower demand from trade war.

Currency-Market-Update-Tuesday-1
Albert Edwards
by Albert Edwards on November 26, 2019

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD stable and poised to strengthen due to conflicting signals about resolving the trade dispute. China agreed to enforce more strict intellectual property protection rules, however, both sides still disagree on tariffs. As a result, USD support is due to strong economic data, higher Treasury bond yields and safe-haven status. The current levies against China is preventing Phase One of the trade agreement from being finalized. President Trump is unwilling to roll back some tariffs and already warned that more will continue if negotiations fall again. China still insists that a trade deal is close. Markets remain hopeful Trump will be willing to compromise after China’s announcement to increase penalties on companies that perpetrate intellectual property theft. New Home Sales for October expecting to drop 0.7% today (from 1.1% increase in September). GDP for Q3 expecting 2% expansion tomorrow. Federal Reserve Chairman Jerome Powell also spoke last night.

Canadian dollar highlights:

CAD under pressure as the ongoing trade impasse has affected demand for oil. Trade optimism is good for CAD and markets will continue monitoring developments with China compromising on intellectual property theft. Higher oil prices have prevented USD from strengthening further and caused risk sentiment, however, CAD is still vulnerable to geopolitical events. Markets will focus on GDP for Q3 on Friday (expecting 1.3% increase).

Euro highlights:

EUR weaker due to risk off sentiment from the ongoing trade war between U.S. and China. The German Business Climate survey was lower than expected for the second straight month. After narrowly avoiding a technical recession in Q3, Germany’s economic growth is slowing, and the Eurozone is fragile. The European Central Bank is expected to continue with their accommodative monetary policy and lower interest rates in Q1 2020. New president Christine Lagarde supports more fiscal stimulus. Inflation Rate for November available on Friday.

British pound highlights:

GBP firm after current polls indicate that the Conservatives lead the Labour party with the election less than three weeks away. Prime Minister Boris Johnson’s party currently has 43% of the vote versus 30% for Jeremy Corbyn’s party; meanwhile, the Brexit party falls. A ten-point lead suggests a majority and markets are optimistic a Tory victory will end the Brexit uncertainty. Johnson also announced he would request a vote on the Brexit deal before Christmas.