The Loonie falls after no surprises with new housing price data.
Thursday 13 December, 2018
Daily Currency UpdateThe USD/CAD fell to 1.3350 (Loonie appreciation) yesterday morning amid a weak US dollar and the WSJ reporting that China is going to rethink its "Made In China 2025" policy, which means that they might open its markets to foreign companies in a move to help resolve trade tensions with the US. On the release front, the new housing price index month to month and year to year came in at 0 percent and 0.1 percent respectively, as expected in both cases; more significant numbers than expected are good for the Loonie, because it is a leading indicator of the housing industry's health and rising house prices attract investors and spur industry activity. But today's data is pushing the USD/CAD higher (weaker Loonie), because there was not a positive surprise. The US/CAD pair is trading at 1.3378, up 0.20 percent.
Key MoversThe US dollar index fell around 0.5 percent in yesterday’s session on an improved risk sentiment as PM May won her confidence vote (200-117) in the UK; and WSJ reported that China is going to rethink its “Made In China 2025” policy, which means that they might open its markets to foreign companies in a move to help resolve trade tensions with the US. However, this morning the US dollar index is rising 0.2 percent, amid the European Central Bank's governing council confirming they will stop expanding quantitative easing (QE) from the end of December (it marks a historic moment for the ECB), and Mario Draghi stating that the balance of risk is moving to the downside. On the release side, the unemployment claims came in at 206k when the forecast was 226k; this also helped the Greenback to make a comeback to the upside.
The European Central Bank leaves its interest rates unchanged and confirms the end of QE in 2019. The ECB's governing council confirmed they would stop expanding quantitative easing (QE) from the end of December when bond purchases fall from 15 billion euros a month to zero. It marks a historic moment for the ECB, as President Mario Draghi dismantles one of his most contentious policies. The ECB also said it would continue to reinvest cash from maturing bonds for an extended period. The EUR/USD is falling slightly 0.19 percent to 1.1346 this morning.
The GBP/USD rallied 1.3 percent yesterday with most of the rally done before the actual vote took place as 185 MPs said they would support her (she needed 159). The good news is that the European Research Group cannot challenge May’s leadership for another 12 months, but the bad news is that she is still facing stiff opposition with 117 voting against her. This opposition is an indication of a reminder of how resilient it’s going to be to get the Brexit vote through Parliament, and why GBP rally was limited after the vote. At this moment the GBP/USD pair is trading at the same highest level of yesterday: 1.2669, which is a strong resistance.
The rally in Asian equities helped the Aussie dollar to trade higher overnight and in this morning as an improvement in tone between the US and China re: trade helped risk assets. The Aussie dollar has recouped some its losses since last Friday; however, the gains are relatively modest. AUD/USD is up to 0.7228, up 0.18 percent, after bouncing off from the 0.7200 handle. In the absence of any domestic data, the US-China Trade issue will be the primary mover for the Aussie the rest of the week.
The Kiwi has mirrored the Aussie dollar’s modest appreciation over the past 24 hours as a mildly risk-on tone benefits the Kiwi-dollar. There is little in the diary for the rest of the week from NZ; however, next week sees ANZ business confidence numbers and GDP figures published. The NZD/USD pair is trading at 0.6867; up 0.15 percent.
- USD/CAD: 1.3321 - 1.3381 ▼
- CAD/EUR: 0.6548 - 0.6621 ▲
- CAD/GBP: 0.5869 - 0.5979 ▲
- CAD/AUD: 1.0321 - 1.0378 ▼
- CAD/NZD: 1.0861 - 1.0939 ▼