Global Themes

The U.S. dollar kept in positive territory after an overnight push to new highs. A tentative calm washed over battered markets thanks to positive U.S. data and hopes that China may loosen monetary policy to support the world’s No. 2 economy. The dollar index held a gain after climbing to fresh 11-month highs, while the euro and sterling were little changed. Firmer oil above $65 helped commodity currencies from Australia and Canada stabilize above one-year lows. Emerging markets caught a reprieve, allowing currencies from Mexico and South Africa to rebound from recent troughs. Market attention today will be on Europe where the U.K. parliament will take up a bill that will determine whether to grant lawmakers a meaningful say in the final Brexit agreement. The ECB is hosting a central bankers summit in Sintra, Portugal at which Fed Chairman Jay Powell will speak.

CAD

Canada’s dollar kept on the defensive after an overnight slide to one-year lows. The loonie pared its losses thanks to oil bouncing above $65 in the run up to an OPEC meeting Friday – the same day that Canada releases central bank impacting data on inflation and consumer spending. To alleviate downward pressure on the loonie, area inflation would have to move further above the Bank of Canada’s 2% goal, something that consensus forecasts show as on the cards. Key for BOC policymakers will be whether upside inflation risks outweigh downside risks to growth from trade disputes with the U.S.

GBP

Sterling steadied after a dip to seven-month lows. Selling pressure abated a bit ahead of a vote today in the U.K. parliament on whether to grant lawmakers greater say in Brexit negotiations. A successful outcome to the vote giving lawmakers a meaningful voice on Brexit matters could boost the pound by increasing the chance of a soft Brexit scenario that treads easier on the economy than a hard one or clean break from the bloc. However, successful passage of the bill could also weaken Prime Minister Theresa May’s hand in negotiations with Brussels, an outcome that could stoke pound-weakening political uncertainty.

USD

The dollar index cruised to new 11-month highs, buoyed by bullish data, safe haven flows and expectations for the Fed to raise interest rates at faster pace than its rivals. U.S. housing starts Tuesday proved the strongest in more than a decade, another sign of the world’s largest economy firing on most cylinders. The dollar today will look for cues in a 9:30 a.m. ET speech by Fed Chairman Jay Powell in Sintra, and data 30 minutes later on existing home sales.

EUR

The euro nursed a bearish bias that kept in near three-week lows. The euro has struggled amid expectations of a lengthier wait for the ECB to eventually raise interest rates from crisis lows, a decline that has been compounded by the risk of a global trade war. Much uncertainty has gripped the outlook for the euro zone economy that has already shifted into a lower gear this year. Friday looms large for the euro when the bloc releases preliminary data on manufacturing and services growth. Any sign of further economic moderation could be the euro’s ticket to new lows.

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