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Currency Market Analysis

Dec 09, 2019 | Currency Market Analysis

Global Themes

  • UK Election Week
  • Chinese Import Tariff deadline approaches
  • Lagarde’s first policy meeting
  • Canadian employment data disappoints

GBP

It is a relatively quiet day for data today and nothing of note for the UK. Having said that, we are now only a few days away from the UK general election.

GBP performed well last week thanks to opinion polls showing an increasing likelihood of a conservative majority, betting markets also now suggest a 70% probability of a Tory victory. Tomorrow we see the latest update from YouGov which will be watched closely considering they produced the most accurate results back in the 2017 election. It will be interesting to see how the markets react to these last few opinion polls and whether they will have a material impact on GBP prior to the official results.

EUR

New European Central Bank boss Christine Lagarde holds her first policy meeting on Thursday. Market participants will scrutinise her every word for a sense of the direction she will take the bank in. Lagarde has taken the helm at a difficult time.

Her predecessor, Mario Draghi, only recently unleashed yet more stimulus to boost a weak economy and lift stubbornly low inflation. Markets are keen to assess her take on the outlook for monetary policy and the economy.

CAD

The Canadian Dollar ended last week horribly, reversing the gains from earlier in the week. The move came when data showed Canadian employment fell by 71.4k in November vs the forecast of a 10k gain.

Economic data along with weak oil prices has kept the Canadian dollar at bay for quite some time now and hence volatility in USDCAD remains at historical lows.

USD

A flourishing US jobs report on Friday should give the Federal Reserve (Fed) enough reason to stick to its plan not to cut interest rates further when they meet on Wednesday. The nonfarm payrolls jobs data showed the US added 266K jobs against an expected 180K provided another boost the dollar.

Officials from China said today that it hoped to make a trade deal with the United States as soon as possible amid intense discussions before fresh US tariffs on Chinese imports are due to kick in on the 15th of December. More volatility is expected this week as investors look for a deal to be done before the deadline but right now it is still hard to make a prediction on the outcome.


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