Currency Market Analysis

Dec 03, 2019 | Currency Market Analysis

Global Themes

The U.S. dollar kept on its back foot on fresh signs of moderation in the world’s biggest economy. The buck sputtered against the yen and Swiss franc and fell to six-week lows against sterling. The euro and Canadian dollar were little changed. The Aussie and kiwi dollars held firm while emerging markets remained on the defensive. Data Monday showed that America’s factory sector remained in a soft patch for a fourth straight month. A weakening manufacturing sector is consistent with a late year loss of economic horsepower. Still, downside for the dollar has been limited so far on hopes that consumer spending is durable enough to withstand global headwinds. America’s jobs report Friday, particularly data on unemployment and wage growth, will shed fresh light on the health of consumers.

GBP

Twin tailwinds power sterling to six-week highs. The pound benefited from the dollar’s data-induced decline while polls showed a wider lead for Conservatives. Sterling tends to strengthen on developments that suggest next week’s election could result in a majority for Conservatives which would bolster prospects of an orderly Brexit by early next year. Sterling’s rise will be tested by U.K. services data Wednesday. Forecasts call for weakness and contraction which if realized could leave the pound vulnerable.

CAD

Canada’s dollar kept toward the bottom of its range after prospects of a U.S.-China trade deal took another turn for the uncertain, weighing on risk sentiment and sending global stocks and oil lower. Meanwhile, appetite for the Canadian currency has cooled ahead of tomorrow’s Bank of Canada meeting. Despite a near certainty that area interest rates will stand pat at 1.75%, the perception of a deepening trade war between the world’s biggest economies would strengthen the case for an insurance rate cut in the months ahead, a scenario that could keep the loonie pointed downward.

EUR

The euro neared two-week peaks as it capitalized on the weaker greenback. The euro also found support from nascent signs of stabilization in the European economy. Numbers this week on manufacturing showed improvement and contrast weakness in the U.S. The euro still retains a fragile bias in the wake of tough talk this week between Washington and Paris over trade. Renewed trade tensions would threaten to undercut any improvement in Europe’s export-dependent economy.


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