U.S. dollar highlights:
USD flat after the Federal Reserve kept interest rates unchanged at 1.75% (as expected). The FOMC decision was unanimous with the labour market stronger and economy rising at a moderate pace. The Fed hopes to see inflation return to the goal of 2% and will continue monitoring geopolitical events (including the effects of the coronavirus). Chairman Powell also said the balance sheet will expand gradually over time. Markets interpreted this as a dovish and neutral statement while stocks increased. Meanwhile, the trade deficit in goods increased 8.5% last month (due to trade tensions eased with China). China restricted travel to Hong Kong after more cases of the coronavirus. All eyes on the GDP Growth Rate for Q4 available today.
Canadian dollar highlights:
CAD defensive as risk aversion continues to support the greenback. CAD is currently at its lowest level in seven weeks as markets are concerned about the coronavirus spreading. Canada is a major exporter of oil so a global slowdown will affect crude prices lower and the economy. Bank of Canada Deputy Governor Paul Beaudry speaks today. All eyes on the November GDP report available tomorrow.
EUR weaker after the German government changed its 2020 GDP growth projection to 1.1% (from 1.0%) but cut the forecast for 2021 (from 1.5% to 1.3%). In addition, the European Union parliament approved the Brexit deal by 621 votes to 49. The next priority is a trade agreement with the U.K. and the deadline is the end of this year. All eyes on the December jobless rate available today and GDP Growth rate for Q4 available tomorrow.
British pound highlights:
GBP weaker and vulnerable as markets expect the Bank of England to be dovish, with a 68% possibility of a 25bps rate cut next month. GBP is also defensive as the central bank could surprise markets and cut rates today. Governor Mark Carney’s last speech will be closely monitored with the deadline to leave the European Union tomorrow. Increased chances of a no-deal Brexit weighing on GBP and markets are starting to price in a recession in the U.K.