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Last week recap
Last week recap
United States Dollar
The US dollar index advanced six tenths of a percent recouping much of the losses sustained in the wake of Tuesday’s congressional midterms. Initial fears Democratic control of the House would stifle future fiscal stimulus and forestall additional tax cuts weighed on the world’s base currency as investors priced in a moderation in the pace of growth and a possible adjustment in Fed policy. Thursday’s FOMC statement helped assure investors the Fed will honour its commitment to monetary policy normalisation and rejuvenated calls for a December rate hike.
The Canadian dollar slipped lower through trade on Thursday briefly falling though 0.76 to mark intraday lows at 0.7586. With little domestic data on hand to drive direction the Loonie succumbed to broader USD upside following the Fed’s commitment to normalising monetary policy. Investors were seeking assurances the FOMC would maintain the current program of interest rate adjustments following the shift in political power earlier this week.
A resolution to recent trade hostilities could help drive confidence in Chinese growth, fostering an uptick in oil prices and supporting a bounce in the CAD. With Trump and Xi Jinping scheduled to meet at the end of the month we expect short term range bound trading with breaks driven by headline data events.
French and German trade balance numbers proffered a mixed assessment of broader European performance and did little to dispel concerns the broader European economy is struggling to stave off a period of sustained sluggishness. This persistent softness paired with commentary from the FOMC, following its November policy meeting, drove the Euro lower as the gap between economic performance and central bank monetary policy continues to widen.
The Sterling lost some of its positive sheen on Thursday as conflicting headlines undermined a potential withdrawal agreement. Meetings between the UK and EU are taking place on an almost daily basis with the latest report by The Time suggesting that a full withdrawal could be published as soon as Tuesday.
On Friday, the Pound had a number of important domestic readings to digest. Month on Month GDP and Manufacturing Production stole the limelight, with attentions now focused on any new Brexit headlines.
The Australian dollar pulled away from one-month highs to start the week, holding vicariously above the US 72 cent handle. The RBA kept rates on hold for a 25th consecutive meeting, changes in forecasts suggested a more positive outlook and helped foster an upbeat tone ahead of Friday’s Quarterly Monetary Policy Statement.
Forward-looking focus is again on key trade discussions with the longer term AUD outlook heavily reliant on the next round of talks between Trump and XI Jinping at the end of the month. Ongoing positivity could foster a break above 0.73 and drive renewed short term support for the AUD as a proxy to Chinese growth.
New Zealand Dollar
The OCR (Official Cash Rate) was, as expected, kept at record lows of 1.75%. News spread that it would stay at this level through 2019 and into 2020.
The Kiwi rose to its highest level in more than two months on Wednesday.
With little on the economic calendar this week, direction was derived from its US counterpart. The US FOMC rate announcement came in as widely expected but the guidance certainly firmed expectations for a December rate hike in the US.
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