U.S. dollar highlights:
USD firm after the ISM Non-Manufacturing Index report was 54.7 (higher than expected 53.5 and previously 52.6 in September). The service sector grew due to new orders and increased employment in October; however, the manufacturing sector continues to struggle. Meanwhile, China requested President Trump to remove the 15% tariffs imposed in September and the 25% tariffs from 2018. Markets are anticipating Trump to remove more duties as China’s demands may affect trade negotiations. The Federal Reserve already lowered interest rates three times this year as a result of the trade war’s effect on the economy. A deal between the world’s two biggest economies will reduce the chances of more rate cuts. Chinese President Xi and Trump could now meet in December while discussions continue over the terms and venue.
Canadian dollar highlights:
CAD weaker on lower oil prices after OPEC is not encouraging more output cuts when they meet next month. When trade tensions between U.S. and China are low, oil prices increase; however, approval for Phase One of the trade agreement could be delayed until next month. Meanwhile, U.S. crude inventories increased by 7.3 million barrels last week. All eyes on the Unemployment Rate for October (expecting 5.6% and previously 5.5% in September).
EUR stable after German factory orders increased by 1.3% in September (versus 0.1% expected). The Eurozone’s largest economy is not causing a recession; however, Germany’s manufacturing activity is still low. Eurozone Retail Sales for September increased 0.1% monthly and 3.1% year over year to also support EUR. All eyes remain on Brexit developments.
British pound highlights:
GBP vulnerable as the Bank of England is expected to hold interest rates at 0.75% today (unchanged since August 2018). However, markets are expecting the central bank’s next move will be dovish and lowering interest rates. With the election less than six weeks away, markets will pay close attention to poll results and this will keep GBP under pressure. Currently, Prime Minister Boris Johnson’s Tories are near 40% while the Brexit and Labour parties are improving.