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Currency Market Analysis

Nov 20, 2019 | Currency Market Analysis

Global Themes

Global risk aversion carried the day and the U.S. dollar broadly higher. The greenback firmed against most peers like the euro, sterling and Canadian dollar. The yen was also sought while riskier emerging markets declined. Geopolitical risks intensified after the U.S. Senate this week voted overwhelmingly in favor of Hong Kong protesters. The Senate unanimously passed the Hong Kong Human Rights and Democracy Act which while positive for the protest movement was considered negative for prospects of Washington and Beijing reaching a trade agreement. Sharing center stage today with the tense Hong Kong situation will be release of the minutes from the Fed’s last meeting and top tier inflation news from Canada.

CAD

Canada’s dollar tumbled to six-week lows as geopolitical risk resurfaced and sparked a flight to safety in the greenback. A rout in oil markets added salt on the loonie’s reopened wounds. Crude hovered around $55 after a 3% swoon the previous day from above $57. The main focus for the local dollar today will be inflation data that could influence the interest rate debate. The Bank of Canada appears to be walking a dovish to neutral line on policy. The risk of a loonie-negative rate cut would increase if inflation were to moderate further below the bank’s 2% goal. Canada’s central bank meets in two weeks on Dec. 4.

GBP

So far the winner of Britain’s first leadership debate appears to be the U.S. dollar. Sterling slipped below four-week peaks the morning after the first debate between Prime Minister Boris John of the Conservative Party and his main challenger Jeremy Corbyn of the Labour Party. Polls haven’t shifted much and continue to point to a solid lead for Mr. Johnson. The vote, though, could be a closer call than the polls suggest with Mr. Corbyn the candidate for those in favor of Britain remaining in the EU.


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