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Currency Market Analysis

Oct 21, 2019 | Currency Market Analysis

Global Themes

The U.S. dollar steadied after falling overnight to fresh multimonth lows. Sterling added to recent gains despite deepening uncertainty over Brexit. The euro and yen were little changed while election day north of the border found the Canadian dollar near three-month peaks. Britain is yet to approve the prime minister’s new Brexit deal. Despite the uncertainty, however, sterling continued its ascent on the view that Britain appeared less likely to crash out of the EU in 10 days without a trade agreement. The Brexit saga, meanwhile, is catching the dollar at a vulnerable time as growing signs of a slowing U.S. economy suggest a near certainty of the Federal Reserve cutting interest rates later this month. Canada’s Justin Trudeau is seeking a second four-year term as the nation’s prime minister with the vote considered a close call against Conservative rival Andrew Scheer.

CAD

Canada’s dollar neared three-month highs as election day got underway. Liberal Prime Minister Justin Trudeau is perceived to be in a close contest against his chief rival, Andrew Scheer of the Conservative Party. Today’s vote could subject the loonie to political risk, particularly if the winner fails to secure a majority in Parliament. Once past the vote, attention is likely to shift back to the Canadian economy and data Tuesday on the consumer. Retail sales are forecast to rise for a second straight month and by a solid 0.4%. A solid print would bode somewhat better for third quarter growth and lessen the likelihood of a loonie-negative rate cut this year.

GBP

Sterling charged to fresh five-month highs despite the U.K. Parliament over the weekend voting for more time to scrutinize the prime minister’s new Brexit deal. The so-called super Saturday came and went with no definitive solution to the Brexit ordeal. Boris Johnson is seeking to put his deal to a vote as soon as today, something the speaker of the House of Commons, John Bercow, is expected to rule on around 9:30 a.m. to 10:30 a.m. ET. The pound powered above a key psychological level, marking a 10-cent recovery from three-year lows in early September, on the perception that the latest Brexit developments have reduced the risk of a disorderly exit.  

EUR

The euro rose to two-month highs as it largely benefited from sterling strength and greenback weakness. The euro’s gradual ascent over recent weeks has it edging closer to key terrain that if breached to the upside could give it technical traction over the short run. The euro is mostly benefiting from signs of a slowing U.S. economy rather than easing concerns about Europe’s economic health.


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