U.S. dollar highlights:
USD stable after the Philadelphia Fed manufacturing business activity index reading was 12.6 in October (versus 9.5 in September). The new orders index also increased to 26.9 in October (previously 9.7); however, the full-time employment index dropped to 15.9 (from 22.1 in September). Existing home sales for September also decreased 2.2% to 5.38 million (lower than expected). Meanwhile, China was approved to buy more soybeans without retaliatory tariffs and President Trump said that negotiations over an initial trade deal are advancing. Markets are confident the world’s two biggest economies may sign an agreement at a meeting next month in Chile and end the eighteen-month trade war. Both economies have slowed from increased tensions and global concerns have reduced (due to the recent truce). The U.S. elections are also in November.
Canadian dollar highlights:
CAD stable and vulnerable following the results of the Federal election and lower retail sales. Prime Minister Justin Trudeau’s Liberal Party secured a minority win (as expected) and markets are concerned that support from the New Democratic Party will be needed to receive legislation approval for key issues. Meanwhile, Retail Sales in August dropped 0.1% to $51.5 billion (lower than 0.4% improvement expected). This represented the first decline in three months (mainly due to lower gasoline prices). Trade developments and Brexit optimism will determine CAD direction the rest of this week.
EUR defensive as all eyes on Brexit developments and the European Central Bank’s monetary policy decision tomorrow. Outgoing President Mario Draghi’s final press conference will also be closely monitored as Christine Lagarde is expected to cut interest rates further next month. Germany and the Netherlands are facing a possible recession so Draghi may suggest additional fiscal support is needed.
British pound highlights:
GBP lower after Prime Minister Boris Johnson loses a second vote in parliament and threatened to call an election. The Withdrawal Agreement Bill was voted in favour, however, parliament rejected Johnson’s proposed timetable that would have forced MPs to pass legislation within the next three days. Johnson said he would pull the U.K. from the European Union by October 31 and his next move is to discuss with European Union leaders to not extend the deadline. Markets will now wait for reaction from the European Union as Brexit developments (and tensions) are affecting GBP.