U.S. Federal Reserve is on Deck Wednesday, A Hold on Rates has been Priced In
Monday 9 December, 2019
Daily Currency UpdateUSD - United States DollarThe U.S. Dollar started on a negative foot last week due to disappointing data, with lower than expected ISM numbers (manufacturing and non-manufacturing). However, the employment data from Friday was enough to push the USD and U.S. Rates higher. Non-farm payroll employment rose by 266 k in November (above the 181k expected), and the unemployment rate came in at 3.5% versus 3.6% expected. Market Participants await the highly anticipated Federal Reserve rate announcement on Wednesday and a hold on rates is being priced in. It is hard to tell if Trump is unpredictable as part of a negotiation tactic or something else, but two days after pouring cold water on the U.S./China phase 1 deal, he started talks with China were "moving right along." There are rumours the U.S. and China are moving closer to agreeing on softening tariffs in a phase-one trade deal, despite the recent tensions over Hong Kong and Xinjiang. The mood in capital markets was much better last week, supported by robust job data in the U.S. However, there is still an awful lot of uncertainties, including a potential retaliation from China, tariffs not being removed before December 15th.
Key MoversThis week's U.K. general election on December 12th is driving pound volatility, and Prime Minister Boris Johnson and Labour Party leader Jeremy Corbyn are going to have a debate ahead of general election day. As a warm-up, Corbyn said Johnson is cheating voters about the impact of the divorce agreement with Brussels, and Johnson denounced Corbyn of trying to manipulate the result of the second Brexit referendum the Labour leader wants by allowing European Union citizens to vote. Central bank meetings and monetary policy releases will be significant events as well. The Fed is set to keep rates unchanged at 1.75%, and last week's strong employment numbers might reinforce the message that rates will remain on hold for a while. In Europe, the ECB might not provide too much excitement under the first gathering of Christine Lagarde, but any surprise can be the catalyst for a volatile week. Finally, the Swiss National Bank will release its Monetary Policy Assessment on Thursday.
- EUR/CAD: 1.1053 - 1.1075 ▲
- GBP/USD: 1.3131 - 1.3181 ▼
- USD/CAD: 1.3247 - 1.3265 ▼
- AUD/USD: 0.6820 - 0.6838 ▼
- NZD/USD: 0.6548 - 0.6565 ▼