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Currency Market Analysis

Nov 22, 2019 | Currency Market Analysis

Global Themes

Sterling stood out in otherwise lackluster currency markets as a nearly 0.5% slide pushed the U.K. unit to one-week lows. The greenback, euro and yen were little changed. Canada’s dollar stabilized ahead of an important read on the nation’s economy. Currency markets have largely entered a slumber-like state as the year winds down. Moreover, few currencies hold a distinct advantage over their rivals, resulting in subdued volatility and narrow ranges. The pound fell after weaker than expected U.K. data offered evidence of rising uncertainty ahead of Britain’s general election next month. In the euro zone, manufacturing improved but services growth moderated. All eyes today will be on Canadian retail sales at 8:30 a.m. ET followed by U.S. consumer sentiment at 10 a.m.


The Canadian dollar rebounded from six-week lows as north of the border numbers this week stopped short of bolstering the case for an interest rate cut next month. Retail sales contracted by a mere 0.1% in September which was in line with forecasts. But the prior number got upgraded to slightly positive territory from a 0.1% decline. The odds of the Bank of Canada cutting rates from 1.75% when it meets on Dec. 4 moderated to a less than 20% likelihood.


Fresh signs of economic weakness in the U.K. weighed down sterling which slipped to one-week lows. Both the services and manufacturing industries, two areas that the Bank of England monitors to shape its policy decisions, went backwards in November. The data offered evidence of the coming election heightening already elevated uncertainty in the U.K. The numbers also added conviction to the calls of two BOE officials who earlier this month voted for an economy-jolting interest rate cut.


Mixed data from the euro zone largely counterbalanced to leave the single currency little changed. Manufacturing contracted again but at a slower pace. Services activity grew but the pace of expansion cooled. Taken together, the data offered little to excite euro bulls as it depicted the ECB locked in an aggressive easing cycle for some time yet.

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