U.S. dollar highlights:
USD firm and gaining momentum after President Trump said he will delay tariffs on $250 Billion worth of Chinese goods by two weeks. As a result, China changed their negotiation strategy (to only trade matters) as tensions are lower. Trump has used trade negotiations to leverage other deals and one of his main concerns with China is stealing intellectual property. Therefore, Trump is unlikely to accept any trade deal with China without resolving this issue. Meanwhile, Consumer Prices in August was 1.7% year over year (versus expected 1.8%) and Core Inflation was 2.4% yearly (higher than expected 2.3%). Food prices increased while energy suffered. Initial jobless claims last week was 204K (previously revised to 219K and lower than expected 208K).
Canadian dollar highlights:
CAD lower after oil prices drop and will be vulnerable (due to safe-haven status). Markets will look to USD for safety as the EUR and GBP keep dropping. Prime Minister Trudeau started the 2019 election by dissolving parliament as economic issues and carbon tax are going to be major deciding factors for voters. Trudeau started his campaign by reviewing his economic record; however, Conservative leader (and main opposition) Andrew Sheer will focus on energy. New housing prices for July decreased 0.1% monthly and -0.4% yearly.
EUR tumbles after the European Central Bank lowered interest rates (as expected). The central bank reintroduced quantitative easing, but only dropped the deposit rate by 10bps (to -0.50%), which was lower than anticipated. This leaves the possibility of future rate cuts open and markets will start to price this in soon. New Central Bank President Christine Lagarde will take over for Mario Draghi in November and growth forecasts have been cut to 1.2% in 2020 (previously 1.4%); meanwhile, the forecast for 2021 remains at 1.4%. The central bank will stay at the present level or lower until inflation “robustly” meets the 2% target rate.
British pound highlights:
GBP stable as markets wait for any Brexit development news. Since parliament is prorogued until October 14, GBP will remain defensive until Prime Minister Johnson meets with the European Commission (on October 17) to propose a new deal or negotiate another deadline extension. Johnson feels that a no-deal Brexit will have minimal effect on the economy; however, markets are concerned about a possible recession.