The US dollar is trading weaker this morning against the Euro, GBP and all other commodity currencies except for the Canadian dollar. The market bought commodity currencies on the back of the oil price bounce which has continued this morning. The dollar traded weaker against the other majors as the market considered the healthcare bill and US trade representatives said that a NAFTA trade renegotiation would be a good opportunity to discuss currencies. Meanwhile, the driving force behind US dollar weakness - US rates - continues to drift lower. This afternoon sees the readings for manufacturing and services PMI on top of new home sales. All three economy indicators are projected to come in slightly higher than previous readings.
The Canadian dollar has dropped significantly this morning as inflation came in much lower than expected. Inflation came in at a very low .1% this month. The market was expecting a reading of .2% which is down from the previous months .4% number. The US, Canada, Japan and much of Europe are struggling with low inflation, and lower levels could hamper growth. Oil has continued its small comeback this morning after hovering near multi-month lows this month. Oil has seen double digit losses since its highs in May. However, strong retail sales yesterday helped support the Canadian dollar as it rallied close to 1% against the USD. OPEC members continue to discuss lowering production, but the markets do not seem impressed. OPEC is already bound by a production agreement and compliance is over 100%, yet this has failed to prevent the collapse in oil prices. Another headache for major producers is the increase in production from the US, Libya and Nigeria.
Very good export data from the CBI saw its factory order book jump to +16 as surveyed manufacturers reported export growth at its strongest in 22 years. However, this positive news had minimal effect on Sterling. It was left until the evening for the Pound to push higher after Theresa May's “fair and serious” offer regarding EU citizenship was given a positive response by Angela Merkel. Kristin Forbes also gave her last speech as an MPC member and said that an interest rate hike should not be held back any longer.
PMI data out the Eurozone this morning was mixed as French PMI came in higher than expected at 55, while German PMI slumped to 53.7. However the overall Eurozone saw its manufacturing production increase to 57.3. Regardless of the mixed PMI readings this morning, the Eurozone’s economy still continues to grow at its fastest pace since 2011.The single currency was very quiet yesterday so it was left to the Norges Bank to provide some entertainment. The Norwegian Central Bank cautiously signaled an end to its accommodative monetary policy, by removing guidance that it could cut rates this year, EURNOK dropped 0.5% at one point. EU’s Moscovici said that Brexit is a lose-lose situation for Europe and Britain, but especially for Britain.
The Japanese Yen continues to trade lower from the elevated levels last week. The Bank of Japan is in no rush to ease its accommodative policy but at the same time it did address improvements in the economy.
After dropping the previous three trading days due to falling commodity prices the Australian dollar is trading higher this morning along with its neighbor the New Zealand dollar. The Ziwi continued its gains after the central bank of New Zealand left interest rates unchanged.
The Mexican Peso is trading stronger again this morning after Mexico’s central bank raised its key lending rate to 7% saying the figure is consistent with its 3% inflation target.
On the other hand the Swissy has had a very quiet week in the absence of any significant data or events.