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Currency Market Analysis

Nov 06, 2019 | Currency Market Analysis

Global Themes

The greenback’s modest winning streak subsided amid tempered enthusiasm about a U.S.-China trade deal. The euro and yen rose against the U.S. dollar while currencies from Britain and Canada were little changed. The buck has performed better of late as better than expected U.S. data allayed slowdown concerns and reduced expectations for the Federal Reserve to cut borrowing rates further. Numbers on third quarter growth, hiring and services sector activity all surprised to the upside. The euro appreciated after surprisingly strong data from Germany assuaged recession fears. Industrial orders smashed forecasts of a modest rise with a 1.3% increase in September which marked the first gain in three months. As for trade developments, the market has moved to wait-and-see mode to see if Washington and Beijing make good on expectations of a first phase trade pact before year-end.

EUR

The euro stabilized after a brush with three-week lows. A rare of late dose of bullish news on the sputtering German economy translated into support for the single currency. The 1.3% surge in German industrial orders in September was far larger than forecasts of a 0.1% increase and was the type of print that offered hope that Europe’s biggest economy may have already weathered the worst of the slowdown.

CAD

The loonie softened toward the lower end of its range as weaker oil prices dragged on the commodity-influenced Canadian currency. A 0.7% decline in crude pushed oil prices below $57. Northern data holds another key to the loonie with a survey due today at 10 a.m. ET on the Ivey PMI of business activity. The last survey surprised to the downside. If that trend continues today it could potentially foreshadow a disappointing jobs report on Friday, scenarios that would increase the chance of the Bank of Canada cutting borrowing costs.

GBP

Britain officially kicked off its five-week race for 10 Downing Street. The political risk associated with the Dec. 12 election limited the appeal of sterling which has been off to the races over recent weeks as fears of a hard Brexit receded. The Bank of England looms tomorrow but is all but certain to keep its limited powder dry ahead of the mid-December vote and the still to be determined path for Brexit. The BOE will issue its policy decision at 7 a.m. ET Thursday.


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