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Currency Market Analysis

Nov 04, 2019 | Currency Market Analysis

Global Themes

The U.S. dollar ticked mostly higher thanks to nascent signs of stabilization in the global economy. The greenback rose against the euro, yen and sterling and held near multiweek highs against the Canadian dollar. Broader markets kicked off the new week in a cheerful mood on hopes that the U.S. and China may be moving toward a first phase trade agreement. Last week’s U.S. jobs report surprised to the upside and suggested that the Fed may be done for the year cutting borrowing rates. In Germany today, final factory sector data for October, while stuck in reverse, got revised slightly higher. Christine Lagarde today delivers her first speech since she succeeded Mario Draghi last week as ECB president. Other focal points for the week include Fed speakers, a Bank of England meeting Thursday, and U.S. numbers on factory orders, trade and consumer sentiment.


Canada’s dollar kept to a tight range and not far from multiweek lows. Canada issues important data this week that could hint at the likelihood of the nation’s central bank lopping interest rates in the months ahead. Another deficit is on the cards for Canadian trade Tuesday. Jobs data Friday are forecast to show unemployment holding at 5.5%, a mere tick above four-decade lows. Data that offer more evidence of economic resilience would be loonie-positive and suggest an elevated bar for a rate cut. 


The euro drifted lower, albeit from elevated levels, on caution ahead of the maiden speech by the new ECB leader, Christine Lagarde. Mario Draghi’s eight-year term ended last week. The market will be all ears to gauge whether Ms. Lagarde follows in Mr. Draghi’s dovish footsteps. The euro continues to hover around mid-August highs, lifted by nascent signs of stabilization in top economy Germany. A gauge of factory growth got revised upward, though the 42.1 print for October was still consistent with an elevated risk of recession.


Britian’s pound softened below multimonth highs, weighed down by political uncertainty. Campaigning is underway in the U.K. with polls pointing to the Conservative Party in the lead ahead of the Dec. 12 vote. Sentiment and polls are likely to shift in the run-up to the vote. With one eye on politics the other this week will be on the U.K. economy. Britain issues influential services growth Tuesday and the Bank of England meets Thursday with no changes to policy expected ahead of the election. 

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