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Currency Market Analysis

Dec 10, 2019 | Currency Market Analysis

Global Themes

The U.S. dollar displayed weakness versus Europe but strength against trade-vulnerable currencies like the Canadian, Australian and New Zealand dollars. The buck treaded water against the yen. Caution reigned ahead of central bank decisions, Britain’s election and the looming deadline for the U.S. to slapped another round of tariffs on Chinese goods. Markets appear to be betting on Dec. 15 coming and going and not seeing Washington ramp up tariffs on China. Still, postponement of tariffs would only prolong uncertainty that has weighed on global growth. Should America press ahead with the tariffs Sunday it could set the stage for another December swoon for global markets. Ahead of Sunday’s tariff deadline, the Fed issues its final policy decision of the year Wednesday, followed the new ECB leader’s maiden meeting Thursday, the same day Britain heads to the polls.

EUR

Better news on Europe’s biggest economy boosted the euro. The single currency rose after a survey of German investor optimism unexpectedly ended the year on a stronger note. The ZEW index turned positive in December, a sign that the trade-related headwinds may be abating. While encouraging, the data should have little bearing on Christine Lagarde’s first policy decision Thursday as the new president of the ECB.

GBP

Sterling firmed to fresh 8-month peaks ahead of the U.K. general election Thursday. Markets’ laser focus on the election overshadowed underwhelming data on the British economy which neither grew nor contracted in October, keeping on a weaker footing. A solid majority win for the Conservative Party could potentially see sterling take aim at new highs for the year.

CAD

Canada’s dollar inched lower as global markets and oil prices struck a defensive pose ahead of U.S.-China trade developments. The loonie also kept to a lower orbit after last week’s shockingly weak jobs report revived the case for a local rate cut in the months ahead.


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