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Canadian dollar update – Monday February 3, 2020. Global economy worries escalate while gold and the greenback benefit.

Canadian dollar update – Monday February 3, 2020. Global economy worries escalate while gold and the greenback benefit.
Albert Edwards
by Albert Edwards on February 03, 2020

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD firm as fears increased about the impact on the global economy due to travel restrictions. The number of confirmed coronavirus cases in China keeps climbing while other countries have reported over 100 cases currently. Meanwhile, U.S. personal spending in December was 0.3% (as expected); however, personal income only increased by 0.2% (versus 0.3% gain expected). These are key economic measures because the Federal Reserve’s target is 2% inflation. All eyes this week on the January jobless report available on Friday.

Canadian dollar highlights:

CAD stable after positive GDP from November, but still defensive on virus concerns. The economy grew 0.1% (due to higher utility costs) after declining 0.1% in October. An eight-day strike at Canadian National Railway affected many sectors (including mining and transportation). The longer the coronavirus outbreak disrupts China, the bigger impact it will have on the global economy (including oil prices). All eyes this week on Bank of Canada Deputy Minister Carolyn Wilkins’ speech on Wednesday and the unemployment rate for January available on Friday.

Euro highlights:

EUR weaker after Q4 GDP dropped to 0.1% quarterly (from 0.3%) and to 1% yearly (lower than 1.1% gain expected). Meanwhile, consumer prices for January increased 1.4% and Core inflation was 1.1% higher (both as expected). Producer prices for December available tomorrow and December retail sales data available on Wednesday. However, all eyes on European Central Bank President Christine Lagarde speaking today and later this week.  

British pound highlights:

GBP firm after the Brexit deadline passed last week and the central bank kept interest rates on hold. Markets expected a rate cut hint from the Bank of England, but the economy is showing signs of improvement after the election. Markets are cautious this may be temporary while trade risks remain. Reaching a new trade agreement with the European Union by the end of 2020 is now the priority.

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