U.S. dollar highlights:
USD steady after positive trade developments with China keeping market sentiment as risk-on. After Presidents Trump and Xi delayed their meeting to next month, a trade deal was in doubt earlier this week. However, China said they agreed to cancel tariffs in phases and Trump will also eliminate tariffs scheduled for December 15, 2019. China is also considering removing restrictions on U.S. poultry imports. As a result, equity markets are trading at all-time highs and oil prices surged. Markets are now confident Phase One of the trade deal will be signed after China said removing the tariffs was an important condition. All eyes on the world’s two biggest economies confirming when and where the trade deal will be finalized.
Canadian dollar highlights:
CAD firm on higher oil prices and trade deal optimism. Currently a 20% chance the Bank of Canada lowers interest rates next month, however, they will monitor economic data closely and the affect of trade negotiations. All eyes on today’s jobless report for October and average hourly wages. Canada employment has been strong the past year and markets are expecting solid job growth will continue to lower the probability of a rate cut.
EUR weaker and defensive after the European Commission downgraded its growth forecasts (due to global trade tensions). The Eurozone is now expected to expand by 1.1% in 2019 (from 1.2%) and 1.2% in 2020 (from 1.4%). In addition, German Industrial Production dropped 0.6% monthly and declined 4.3% year over year to put more pressure on EUR. However, construction in the Eurozone’s largest economy expanded in September and October (after contracting in July and August). All eyes on new central bank President Christine Lagarde regarding monetary policy and the Inflation Rate for October (available next week).
British pound highlights:
GBP continues weaker after the Bank of England remained dovish and kept interest rates unchanged at 0.75% (as expected). Governor Mark Carney said they are concerned about employment and the risks of a global economic downturn. Carney also warned the risk of a no-deal Brexit may result in job losses and business closures. Two policy members voted for a rate cut and unless the economy improves, markets are now expecting lower interest rates in Q1, 2020. Although wages and employment are firm, the jobs market is suffering from Brexit uncertainty. All eyes remain on next month’s snap election.