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The Greenback weakens amid positive reports for commodities and an improved mood in the markets

By OFX

Despite an improved mood in capital markets with equity futures pointing gains of over 1% for today’s session, the US dollar is losing -0.19%. The US markets have been addicted to robust economic numbers from the US, but quarterly GDP reports point to a slowdown. In general, there is some speculation that the Federal Reserve could ease up on its interest rate hikes next year.

Markets are also looking at US-China trade relations ahead of a Group of 20 summit in Argentina at the end of the week.

On a different note, Goldman Sachs is predicting that commodities will soar in 2019. It expects improved performance in crude, gold, oil and natural gas. And it is considering the possibility that the US dollar might reverse its strong performance next year.

The latest increase of the consumer price index, to 0.3% vs. a 0% expectation (month to month) and 2.4% vs. a 2.2% expectation (year to year) helped the Loonie to stay flat during last Friday’s trading session, given an unfavorable environment for commodity currencies.

This morning, the story is different. Crude is bouncing by almost 2%, getting back some of the losses after over a 6% fall last Friday. The International Energy Agency predicts global oil demand will top 100 million barrels a year in 2019, growing at a rate of 1.4 million barrels per day, but this is down from its initial assessment in June of 1.5 million barrels per day. On the flip side, Goldman Sachs is expecting OPEC supply cut in 2019 and improved performance in the price of oil.

The gross domestic product numbers will shed some light on the Loonie this Friday.

The Euro is higher this morning as the shared currency rallies on positive news regarding Italy’s budget. Reports emanating from Italy have stated that the coalition government could publicly state a lower target deficit rate in an effort to get the controversial spending plans approved by the EU. The current deficit target is 2.4%, under the 3% threshold that EU law limits it to, however the EU was hoping for higher than the 1%, given Italy’s huge 131% of GDP debt load.

This week’s notable events are this morning’s discussion from European Central Bank President, Mario Draghi, in Brussels regardubg monetary policy and the health of the EU economy. Friday’s big data is inflation figures from the bloc with CPI predicted to fall back to 2.1% from 2.2% with the core reading remaining depressed at 1.1%.

The pound is rising by 0.35%, reaching an intraday high of 1.2864 this morning, as traders digest the news of the EU signing off UK Prime Minister Theresa May’s Brexit withdrawal agreement in Brussels yesterday. The plan was unanimously given the green light by EU heads of state and signals the beginning of a campaign by the PM to get the plan approved in a vote in the House of Commons next month. May’s proposal looks likely to be voted down by dozens of members of her own Conservative party; however, it will be interesting to see how many fall in line, given the potential economic damage that voting against it could cause the UK economy.

The Pound will likely be capped before the crucial parliamentary vote, where it will likely either soar or collapse based on the outcome of the MPs’ poll. The vote is penciled in for December 12.

The Aussie is benefiting from risk-on trade environment this morning, with the AUD/USD testing 0.7276 overnight and trading at 0.7244 this morning. This week’s big release is the quarterly private capital expenditure number due Wednesday night with 1.1% growth expected for the July-September period.

This week’s first top tier data has come from New Zealand where retail sales numbers missed the target by some distance. An expected rise in the overall reading of 1% and core reading of 1.5% instead saw the overall reading coming in flat with the core figure showing a mere 0.4% growth. The miss saw the NZD/USD gap lower by 30 pips to around 0.6755; however, the global risk on environment has helped pare these losses with the NZD/USD now at the 0.6805 level.

Tuesday afternoon sees the latest Reserve Bank of New Zealand Financial Stability Report published with bank chief Adrian Orr due to give his thoughts on it at a press conference shortly after.