The U.S. dollar falls following weak PMI data and awaiting employment numbers tomorrow.
Thursday 5 December, 2019
Daily Currency UpdateUSD - United States DollarThe U.S. dollar continues falling, for instance, the U.S. dollar index has fallen 0.13 and its most crucial component, the USD/EUR pair has fallen around 0.17 percent. Fundamentally speaking, this is likely due to the disappointing PMI data, which are still fresh in market participants' minds with disappointing PMI data readings, but the most critical piece of information will be released tomorrow, Non-Farm Payrolls. A stronger than expected NFP report and an increase in average hourly income in tomorrow's release will be helpful to repair some damage done by the PMI data to the U.S. dollar. Economic activity in the non-manufacturing sector grew in November for the 118th consecutive month, but it came at 53.9 versus the expected higher number of 54.5. It also was 0.8 percentage points lower than the October reading of 54.7 percent. There are rumors that the U.S. and China are moving closer to agreeing on the number of tariffs that would soften in a phase-one trade deal and despite the recent tensions over Hong Kong and Xinjiang (see the bounce of global equity markets to find clues). So the capital markets mood is much better this morning, helping currencies such as the Canadian dollar, Swedish krona, and Norwegian krone to rise. For now, it seems that the U.S. dollar is not responding to trade deal news anymore. However, there's still an awful lot that can go wrong in trade negotiations that would cause the U.S. dollar to move in any direction. Historical charts indicate the greenback would move lower if there is no phase one agreement by December 15th.
Key MoversThe BoC maintained its target for the overnight rate at 1.75 percent, and their projection for global economic growth appears to be the same, which helped market participants to have a positive attitude towards the Loonie. According to the BoC, there is evidence that the global economy is stabilizing, with growth still expected to edge higher over the next couple of years. The BoC clarified though that growth in Canada slowed in the third quarter of 2019 to 1.3 percent, in line with expectations. Consumer spending expanded moderately, housing investment was also a source of strength, exports contracted, driven by non-energy commodities, and investment spending unexpectedly showed strong growth. Finally, CPI inflation in Canada remains at the BOC's target, and measures of core inflation are around 2 percent. Early today, BoC deputy governor Timothy Lane caused the USD/CAD pair to fall another 16 pips to 1.3159 (stronger Loonie). Regarding yesterday's close, the USD/CAD is declining by 0.3 percent. However, Loonie's rally versus the U.S. dollar was over 0.7 percent yesterday, which makes, at least, a 1 percent appreciation of the Loonie in two days at the time of this writing. Lane said that the Canadian economy remains flexible despite the global uncertainty caused by the trade war; he added: "It is because of this strength amid the turmoil that we say Canada is resilient, although not immune." He emphasized there is no reason for the BoC to move in step with the U.S. Federal Reserve.
- USD/CAD: 1.3146 - 1.3191 ▼
- EUR/USD: 1.1066 - 1.1117 ▲
- GBP/USD: 1.3120 - 1.3203 ▲
- AUD/USD: 0.6816 - 0.6849 ▼
- NZD/USD: 0.6505 - 0.6545 ▼