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Greenback firm due to safe-haven demand and risk-on again.

Currency-Market-Update-Tuesday-3
Albert Edwards
by Albert Edwards on November 05, 2019

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD starting the week strong and may gain more momentum as trade deal hopes were improved after Commerce Secretary Wilbur Ross said that a preliminary trade deal would be signed soon. Ross said that they are “very far along” with Phase one and last week President Trump said a trade agreement would be signed in the U.S. In addition, equity markets are also higher on hopes of a trade deal between the world’s two biggest economies this month. Both countries said progress was made in defusing the trade war while Chinese Premier Li Keqiang met with Ross and Secretary Adviser Robert O’Brien in Bangkok. Last week’s increase in non-farm payrolls also provided a boost for USD, however, growth is expected to slow in Q4. Meanwhile, factory orders decreased 0.6% in September (due to lower demand for transportation, computers and electronics).

Canadian dollar highlights:

CAD stable as oil prices remain firm due to positive trade developments. Friday’s unemployment rate for October is expecting a 15K gain in jobs as the labour market remains strong. However, the Bank of Canada’s cautious outlook has put CAD under pressure. The central bank remains on hold regarding interest rates and markets expect Governor Poloz will follow the Federal Reserve in 2020. Higher oil prices and a trade deal signed this month will continue supporting CAD.

Euro highlights:

EUR defensive after Spain’s manufacturing Index dropped last month to 46.8 (from 47.7 in September). This represented the lowest reading since 2013 (when Spain was in a recession). During Christine Lagarde’s first speech as European Central Bank President, she did not mention anything on monetary policy. However, the Eurozone is suffering and under pressure to increase fiscal measures. Producer Prices for September expecting 0.2% monthly and -1.1% year over year today.

British pound highlights:

GBP weaker due to uncertainty over the December 12 election. Brexit Party leader Nigel Farage will unveil 600 candidates for the general election, and he will challenge the Tories (unless Prime Minister Boris Johnson cancels his current deal with the European Union). Farage’s actions may result in less seats for Johnson’s Conservatives and prevent a deal passing through parliament. Farage’s hard Brexit stance is also keeping GBP under pressure due to the threat of bringing Tory voters into the Brexit party. Currently, the Brexit party has 11% support with 37% support for Johnson’s Tories and 26% support for Jeremy Corbyn’s Labour party.

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