The US dollar is waiting for economic data
Thursday 6 December, 2018
Daily Currency UpdateIt was a quiet session for the US dollar yesterday after the national day of mourning in honor of Bush. The Greenback is trading slightly lower this morning; - 0.12 percent, following the drop of the S&P Futures, and the arrest of Chinese giant, Huawei's CFO. She was arrested in Canada on December 1st at the request of US authorities - the same day as the Trump-Xi G20 dinner and during a time of already high tensions between China and the US. On the positive side, China’s Ministry of Commerce said on Thursday that Beijing would “immediately implement” agreements made at the G20 summit, involving the Chinese purchase of U.S. products. The ministry also said planned talks on US intellectual property and market-access concerns would occur within the allotted 90-day window, before U.S. tariff increases are set to resume.
Key MoversThe Loonie has lost over 1 percent against the Greenback in the last two days (the USD/CAD has moved from 1.3262 on Tuesday’s close to 1.3445 early today). The big spike started during yesterday’s trading session, when the BoC made its announcement of holding the key interest rate unchanged at 1.75 percent. The BoC’s statement was dovish, and inferred that non-inflationary growth is likely. It highlights downside risks around trade policy, lower oil prices, less momentum of economic activity into the fourth quarter, and the contraction in business investment in the third quarter. Over the next few days you should continue paying attention to oil prices; this morning did not offer good news. Saudi Arabia’s oil minister said there had not yet been any agreement made over oil output cuts, and oil prices of the West Texas Intermediate (WTI) Futures fell 2.5 percent to U$ 51.57 a barrel. The oil situation is causing further pressure on the USD/CAD pair, which is trading at 1.3412 at the time of writing. On the positive side for the Loonie, the statement from the BoC kept the door open to further hikes, and continued to say that the policy rate will need to rise into a "neutral range." The change is that there is the new emphasis on "range," which the BoC expects to be 2.5-3.5 percent.
EUR/USD is trading 0.15 percent higher, at 1.1362. The EU final Markit Composite PMI for the month of November came in at 52.7 yesterday, which was better than the initial estimate of 52.4, but below October's reading of 53.1. EU Retail Sales were also released, increasing by 0.3 percent for the month October and beating expectations; although the yearly reading fell short of the market's forecast. There are no scheduled data releases from Europe today, so all eyes will be focused on US data releases and risk events.
The Pound showed some early signs of recovery yesterday on the back of – you’ve guessed it – Brexit related news. After the government was defeated on three fronts in the Commons on Tuesday, MPs will now be able to exert more influence by voting on what they want the government to do. Some are theorizing this could work in May’s favor; if her deal is rejected and amended, it could deliver a softer Brexit, meaning some Brexiteers may feel the PM’s deal is better. The UK Services PMI printed weaker than expected on Wednesday, which put GBP/USD on the back foot, again. The index came in at 50.4 versus expectations for 52.5. Despite a lack of economic data, the GBP/USD is trading at 1.2762, 0.21 percent higher, at the time of writing.
The AUD/USD pair is trading lower at 0.7205 this morning, given its close trade association with China, and after trading around 0.7300 yesterday. New outlets reported overnight that the Chief Financial Officer of the Chinese telecoms giant Huawei has been arrested in Canada and is now facing extradition to the US. The company is being investigated over possible violations of sanctions against Iran. The markets didn’t react too well to the news, given the rising trade tensions between the US and China as of late, and Asian stocks were sold heavily overnight.
The NZD/USD pair lost ground overnight, for a lot of the same reasons that the AUD/USD did. There were no Kiwi data releases today, and so market participants’ attention will likely remain affixed on the developing US-China story, US data, and risk events due in the trading session for today.
- USD/CAD: 1.3350 - 1.3432 ▲
- EUR/USD: 1.1350 - 1.1400 ▲
- GBP/USD: 1.2722 - 1.2800 ▲
- AUD/USD: 0.7200 - 0.7300 ▼
- NZD/USD: 0.6850 - 0.6900 ▼