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Canadian dollar update – Friday February 7, 2020. Risk appetite improves on tariff rollback and all eyes on the jobless reports.

Canadian dollar update – Friday February 7, 2020. Risk appetite improves on tariff rollback and all eyes on the jobless reports.
Albert Edwards
by Albert Edwards on February 07, 2020

CURRENCY MARKET UPDATE

U.S. dollar highlights:

USD remains firm after China confirmed they will go ahead with the phase one trade deal and announced they will rollback some tariffs on U.S. imports for February 14. Stocks and futures are higher as a result as market mood improves. Meanwhile, worker productivity increased 1.4% annualized in Q4 (versus 1.6% expected). In addition, jobs cuts increased by 106% to 67,735 in January. Jobless claims last week were 202K (lower than expected 215K). Unemployment rate for last month expecting 3.5% today. A lower jobless rate will continue to strengthen USD.

Canadian dollar highlights:

CAD stable and still under pressure after Senior Deputy Governor Caroline WIlkins did not reference any monetary policy plans. Wilkins highlighted some risks and mentioned the economy was subject to “secular stagnation”. Markets are now pricing in the chance of a rate cut at 12% (versus 25% two weeks ago). CAD has been flat all week as markets wait for today’s jobless report (expecting 5.8% and previously 5.6%). A higher unemployment rate will cause CAD weaker.

Euro highlights:

EUR weaker and trending lower after German factory orders dropped 2.1% monthly in December. The Eurozone’s largest economy continues to suffer a recession in the manufacturing sector, and this is weighing on the EUR. Fears of the coronavirus have receded, but EUR also remains vulnerable to USD strength.  

British pound highlights:

GBP lower and remains under pressure after the European Union plans to impose tougher financial regulations on the City of London. By overturning concessions made to the U.K., this has increased tensions again as the two sides have until the end of 2020 to negotiate a trade agreement. Markets will focus on next week’s Q4 GDP data (previously 0.4% quarterly expansion in Q3).