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Currency Market Analysis

Jan 17, 2020 | Currency Market Analysis

Global Themes

GBP

The British consumer going a record five months without spending weakened sterling and strengthened the case for the Bank of England to cut lending rates to all-time lows as soon Jan. 30. U.K. retail sales unexpectedly fell in December when they contracted by 0.6%. That followed an even bigger decline in November. Consumers last spent in July, making the hiatus the longest on record. Consumer caution highlights the downside growth risks that Brexit uncertainty represents. The odds of a BOE rate cut this month to 0.50% from 0.75% rose to around 65% from 57% yesterday. Still, the data hasn’t dealt a significant blow to sterling given how the BOE is sometimes hard to read and how officials have limited space to ease policy.

CAD

Canada’s dollar was mildly subdued against the broadly stronger greenback. But downside for the loonie has proven limited on expectations for the Bank of Canada next week to maintain steady lending rates at 1.75%. For the week, the loonie has traveled less than half a cent, a sign of investor reluctance to stake meaningful bets ahead of central bank decisions on both sides of the border this month.

JPY

The yen continued a southerly descent that pushed it into its largest hole in eight months. Safer bets have lost some sheen amid moderating trade tensions between the U.S. and China, and signs of both economies stabilizing after recent slowdowns. China’s economy grew at a steady 6% pace in the fourth quarter. For 2019, China grew at a slightly better 6.1% rate, though that was the weakest in nearly three decades.


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