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Currency Market Analysis

Dec 05, 2019 | Currency Market Analysis

Global Themes

Trade uncertainty, better data abroad and weaker numbers at home conspired to weigh on the greenback. The dollar steadied against the yen but was at or near one-month lows against the euro, Canadian dollar and Swiss franc. The buck racked up more losses against sterling which remained on a tear ahead of next week’s U.K. election. Canada’s dollar received a shot in the arm after the Bank of Canada left interest rates unchanged at every meeting this year and signaled a hesitancy to ease policy anytime soon. Canada’s central bank acknowledged nascent signs of stabilization in the global economy, a factor that’s dogged the U.S. currency. America’s monthly jobs report Friday should shed light on the extent to which sentiment has dimmed toward the dollar. The snapshot of America’s job market in November appears sunny with faster hiring and wage growth on the cards. 


A pre-election rally lifted sterling to fresh seven-month peaks. Hopes that the Dec. 12 vote may usher in a period of political stability and potentially bring the Brexit crisis to a close buoyed the pound. For now, political factors have overshadowed fundamental weakness in the U.K. economy following negative numbers this week on manufacturing and services growth. 


It’s tough to tell the difference between the loonie and sterling against the weaker greenback. Both currencies are on notable runs this week and their exchange rates look eerily similar. Canada’s dollar is flying at four-week highs after the country’s central bank left rates unchanged and noted budding signs of improvement for the global economy. Along with elevated consumer debt loads, it suggested a rate cut isn’t on the table over the near-term – a potential game changer for the better for the loonie. Local trade data today was mildly supportive of the loonie as the deficit narrowed more than expected to C$1.08 billion in October but exports trailed imports.


The euro held firm after bursting to one-month peaks this week. The euro’s bounce lost some steam after weaker than expected data from Germany dampened hopes of a recovery edging closer. German industrial orders unexpectedly fell in October. Broader pressure on the single currency has abated in the wake of the dollar’s data-driven decline. From a technical picture, the euro likely needs to rise by another cent to suggest a material brightening in sentiment.


The dollar remained in the doldrums after mixed data. On the bright side, weekly jobless claims improved more than expected, suggesting this week’s disappointing ADP report was more of a blip than the start of a softening labor market. America’s politically-sensitive trade gap shrank to 1 ½ year lows of $47.2 billion in October. Still, the smaller shortfall was consistent with slower fourth quarter growth, a theme that’s weighed on the dollar this week.

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