The Greenback started 2020 at the lowest level in over a year as trade tensions with China have eased. The Phase One trade deal improved risk appetite and stocks gained. The world’s two largest economies have agreed to a truce and no further tariffs are planned. The next Phase Two trade agreement will be critical as President Trump seeks re-election this year. USD is forecasted to only improve within 1% by Q4.
The Canadian dollar has been one of the strongest G10 currencies to start 2020 on higher oil prices and trade optimism. The USMCA trade agreement was also signed. Manufacturing, labour and retails sales are weak. The Bank of Canada remains neutral and the economy is performing well so Governor Poloz sees no reason for a rate cut yet. CAD is forecasted to remain stable and buyers are looking for a break of 1.3000 rate.
The Euro is under pressure to start 2020 with the Brexit deadline on January 31. Inflation and manufacturing activity are lower than expected so the central bank needs to improve the economy. EUR is forecasted to improve by Q4, so buyers are taking advantage.
The pound has lost momentum from the December majority election results as the latest retails sales report was lower than expected. Concerns of a no-deal Brexit were removed after Prime Minister Johnson’s Brexit bill was passed. However, a trade agreement with the European Union is still outstanding and causing market uncertainty. GBP forecast is neutral and weaker by Q4 currently.