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Currency Market Analysis

Dec 04, 2019 | Currency Market Analysis

Global Themes

Dollar wallows, hits 1-month lows

The U.S. dollar stuck near one-month lows as trade developments continued to dictate sentiment. The greenback steadied against the euro and yen but tumbled to seven-month lows against sterling. Expectations that the Bank of Canada today won’t cut its policy rate supported the loonie. Market sentiment brightened after a Tuesday slide on reports of trade progress between the U.S. and China. The dollar index flirted with one-month lows after President Trump this week floated the idea of not reaching a trade agreement with China until after next year’s U.S. presidential election. Meanwhile, the ongoing trade feud has been credited with sending American manufacturing into a slump. The concern is that factory weakness could spread to data today on services growth and Friday on the job market.


The loonie firmed on expectations that the Bank of Canada today would stand pat on lending rates and signal an elevated bar to rate cuts given the economy’s resilient shape. Canada’s central bank will render its decision at 10 a.m. ET, when it is all but certain to keep its main rate unchanged at 1.75%. It may be too soon yet for the BOC to upgrade its vigilant outlook for global trade, a key headwind on the country’s export-dependent economy. A BOC that emphasizes global risks over domestic resilience could keep the loonie anchored around its current, well-worn range.


A mixed euro clocked one-month highs against the data-dinged greenback but tumbled to mid-2017 lows against sterling. The euro pushed to session highs against the dollar after U.S. jobs data surprised to the downside, aggravating concerns about trade uncertainty weighing on the economy. ADP’s jobs report showed hiring slowed to 67,000 in November, a lackluster amount less than half the forecast of 140,000.


The notion that next week’s election might help Britain get its Brexit and political houses in order unleashed a pound rally that propelled it to seven-month highs. So far things appear to be going according to plan for Boris Johnson. The prime minister pushed for early elections in the hope of winning a majority that might give the Conservative Party more leeway to push an orderly Brexit across the finish line by late January. Still, opinion polls should be taken with a grain of salt given their recent sketchy track record.  

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