Global Themes

America’s dollar stabilized Friday after a data-inspired dip the day before. The buck was back near three-month highs against the euro as it rose against the yen and most European rivals. Canada’s dollar pushed above three-week lows, boosted by oil’s climb above $55. Sterling rose above one-month lows after data showed a surprise splurge in U.K. consumer spending to begin the year. The greenback lost ground Thursday after a shock slide in U.S. retail sales in December suggested the world’s biggest economy began 2019 with less horsepower than anticipated. Nevertheless, dollar bulls appear inclined to look beyond the data given that the outlook for spending remains bright thanks to cheaper gas prices, rebounding stocks and America’s strong job market. The dollar today will look for direction from U.S. numbers on factory growth and consumer sentiment.


The same economy that punched the dollar in the gut Thursday gave it a lift Friday as the Empire State index showed stronger than expected factory growth in the New York area in February. The data was the forward-looking variety and fit with the notion that the U.S. economy might be in better shape than the disastrous retail sales data suggested. More data loom today with industrial production at 9:15 a.m. ET, followed by another timely reading on the economy when consumer sentiment comes due at 10 a.m. Next week: The minutes from the Fed’s last meeting, due Feb 20.


The downtrodden euro clocked fresh three-month lows and was on track for a second fall in as many weeks. Once again, the euro was stung by mounting signs of weakness in Europe. The big blow this week came from Germany whose economy failed to grow last quarter and just narrowly dodged recession. While the growth data was backward-looking, even forward-facing numbers have been uninspiring of late which suggests the bloc’s soft patch stretched into 2019, weakening the case for a euro-positive ECB rate hike this year.


Canada’s dollar was little changed, though above three-week lows hit the previous day. Stronger oil markets put a floor under the loonie with crude prices topping $55. Canada’s dollar is on track for a subdued week after downbeat local factory data added to signs of a moderating global economy, a narrative that’s put downward pressure on commodities and upward pressure on the greenback. FX markets swung to retail sales readings from the U.S. and Britain this week. The spotlight next week will be on the Canadian consumer with retail spending due Feb 22. Forecasts call for a second straight negative number.


Sterling steadied above one-month lows after data showed a strong showing by U.K. consumers to begin 2019. The lowest inflation in years translated into robust spending as retail sales jumped by 1% in January, dwarfing forecasts of tiny increase. The data helped to divert attention away from the seemingly never-ending Brexit drama. A symbolic measure in the British Parliament this week likely weakened the negotiating stance of Prime Minister Theresa May with Brussels. The Brexit process appears at a standstill until Feb 27 when lawmakers are expected to voice their opinion on which direction to pursue. The pound could strengthen if Britain decides to delay its exit beyond late March or if Parliament eventually backs the prime minister’s deal. On the other hand, sterling could stage a significant slide if Britain should crash out of the EU without a deal.

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