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Currency Market Analysis

Nov 14, 2019 | Currency Market Analysis

Global Themes

The euro hovered around one-month lows despite better than expected data from Germany. A lack of progress lately on the trade front checked a stock rally and buoyed safer plays like the greenback, and the yen and Swiss franc which both climbed to one-week peaks. Sterling kept to a range while Canada and Australia favored their back foot. The German economy unexpectedly grew by a scant 0.1% during the third quarter which allowed it to narrowly avoid recession. But the figures were no cause for celebration and did little to allay the intense headwinds that remain on Europe’s biggest economy. On today’s U.S. docket are reports on weekly jobless claims, wholesale inflation and a second day of congressional testimony on the U.S. economy by Fed Chair Jerome Powell.


Downbeat data weighed on sterling which kept to a range on hopes of a decisive outcome to U.K. elections next month that could lend clarity to Brexit. British retail sales surprised to the downside with a 0.1% decline in October. The data highlighted how Brexit uncertainty has translated into consumer caution which can increase the chance of the Bank of England easing monetary policy. 


Canada’s dollar hovered around one-month lows against the greenback as a lack of progress on the trade front between the U.S. and China weighed on trade-sensitive currencies. The loonie also has lost fundamental ground after the Bank of Canada last month sketched a dimmer outlook for global growth which unlocked the door to lower interest rates. Canada’s central bank Gov. Poloz is set to speak today, remarks that could hint on the outlook for monetary policy. 


The greenback firmed as it served as a safe haven from weaker global markets, while higher U.S. inflation cemented the view that the Fed was done cutting interest rates for the year. U.S. consumer prices rose by 1.8% in October, a tick higher than forecasts to steady at 1.7%, which moved prices to within a couple ticks of the Fed’s 2% benchmark. The head of the Fed, Jerome Powell, will command attention today when he testifies on the economic outlook before congressional lawmakers starting at 11 a.m. ET. Remarks that voice confidence in the health of the economy would affirm markets’ high bar for a rate cut anytime soon, a tone that could support the buck.


The euro fell to fresh one-month lows despite news that Germany dodged recession last quarter. Europe’s largest economy eked out a 0.1% rate of growth during the July-September quarter which followed a downwardly revised fall of 0.2% in the second quarter. The data was no cause for celebration as significant headwinds on growth remain from global trade instability and the uncertain outcome of Brexit.

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