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Greenback Steady as China is Ready to do a Deal (Partially)

Albert Edwards
by Albert Edwards on October 08, 2019


U.S. Dollar Highlights:

USD firm after the Chinese Commerce Ministry is ready to do a deal on the parts of the negotiations both sides agree upon. China will also set out a timetable for the harder issues to be resolved in 2020. Since China is reluctant to agree to a broad trade agreement (and may take a tougher negotiating stance), market tone is soft. The world’s two biggest economies will resume trade negotiations later this week and markets are hopeful the recent truce will lead to more positive developments. However, the absence of a trade deal may lead to more punitive tariffs. China may also capitalize on President Trump’s ongoing impeachment issue. Last week’s unemployment report for September indicated slow job creation and markets are concerned whether the economy is facing a recession or just slower growth. Producer Prices for September expecting 0.2% increase monthly and 1.9% year over year today.

Canadian Dollar Highlights:

CAD defensive on lower oil prices and trade developments between U.S. and China. Positive trade developments will strengthen CAD as the economy has been suffering from lower global demand for crude oil (due to the trade war). Housing Starts for September expecting 200K today and Building Permits for August dropping 1.5% monthly; however, all eyes on the September Unemployment Rate on Friday (expecting 5.7% and same as August).

Euro Highlights:

EUR stable after German factory orders dropped 0.6% in August, continuing a decline for fifteen straight months. Germany is now close to a recession after the manufacturing sector continues to suffer and increased risks of a no-deal Brexit slowing the economy. EUR direction this week will be determined on Brexit news and trade developments between China and U.S.

British Pound Highlights:

GBP tumbles lower after Prime Minister Boris Johnson is ready to challenge Parliament’s no-deal Brexit law requiring him to request an extension by October 19. Market concerns have increased that Britain and the European Union will not finalize a deal by the October 31 deadline. Johnson also encouraged French President Emanuel Macron to secure a deal as he tries to gain support; however, his latest Brexit proposal was already rejected by the European Union. All eyes on the U.K.-European Union summit next week.