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Market watch - 5th December 2019

The Greenback came under renewed pressure yesterday and this morning on more tariff news, increased risk tolerance, along with the worse than expected ADP Non-Farm Employment Change at its six-month low of +67K compared to its +137K consensus forecast and +121K reading for previous.   US Secretary of Commerce Ross stated on Tuesday that it was more important to get the right deal with China rather than immediate timing, implying the phase one deal won’t be signed before Christmas thus very likely pushing it to next year.  That said, a Bloomberg report countered this stating that both countries are still targeting 15 December for the deal. USDCNY rose to its fresh 41-day high yesterday but dropped to its two-day low today as it continues to move sharply on US-China trade deal news.  Meanwhile, the President announced a potential 100% tax on French luxury items yesterday including champagne, handbags, and cheese in retaliation to France implementing a new digital services tax which is negative for American based technology companies. EU officials stated they would retaliate against US tariffs, but this could encourage Trump in forcing his previously threatened duties on European autos. 

The Buck fell to its one-month low with the Euro and Swiss Franc yesterday, its one-month low with the Loonie today as the BoC reiterated yesterday morning their key Overnight Rate is “appropriate” for now, its fresh 7-month low with the broadly firmer Sterling this morning as the Conservative Tory Party has maintained a 10-point lead in polling, while USDJPY rose to its two-day high on risk-on factors after falling one Yen from its sharp 6-month high on Friday morning.  The Buck ticked a bit higher with the Aussie Dollar today after AUDUSD hit a three-week high on Tuesday due to a miss on Australian GDP QoQ, Trade Balance, and Retail Sales MoM, while NZDUSD hit its new 4-Month peak due to Dollar weakness coupled with improved market risk tolerance.

On a positive note, the US Trade Balance was released at -47.2B versus -48.7B forecast today ahead of Factory Orders MoM coming later this morning and the key domestic employment report on tap for tomorrow.

The Canadian Dollar rallied to its one-month best with the Buck today as the Bank of Canada (BoC) yesterday emphasized their key Overnight Rate was “appropriate” for now at 1.75% while citing the “intact” global economic recovery while the WTI crude oil price hit a fresh 75-day high this morning. The Loonie also rose sharply from its 13-day lows versus both the Euro and Yen from Tuesday morning, with EURCAD touching its nine-day low and CADJPY hitting a one-month high today.  The domestic Labor Productivity QoQ figure yesterday morning was exactly on target at +0.2% while there was an improvement to +0.1% form +0.2% previous.  Canadian Trade Balance was better than expected today at -1.1B versus -1.4B consensus but with a downward revision to -1.2B from -1.0B previous.  Ivey PMI data follows later today before the key Employment Change and Unemployment Rate figures on Friday morning.

The Euro is trading close to its fresh one-month peak versus the generally weaker Greenback from yesterday but fell to its nine-day high versus the Canadian Dollar and while hitting its 31-month low against the broadly firmer Sterling today. Eurozone Retail Sales MoM was disappointing at -0.6% compared to its -0.4% forecast with a significant downward revision to -0.2% from +0.1% for the reading last month. Revised GDP QoQ and Final Employment Change QoQ was exactly on target for today at +0.2% & +0.1% respectively. Market participants remain concerned about lacklustre economic data for the region.  Meanwhile, strikes began today in France to protest the pension reforms President Macron has enacted.  German Industrial Production MoM is scheduled for release tomorrow early morning.

The British Pound is trading broadly higher as the UK polls still have a 10-point lead for the Conservative Tory Party over Labour for the moment. A clear Conservative majority could give Prime Minister Boris Johnson the mandate he needs to pass his Brexit deal. The UK Final Services PMI was released yesterday morning at 49.3 compared to its 48.6 consensus forecast/previous number.  Sterling jumped to its fresh seven-month peak with the Greenback, Yen, and Swissy this morning, touched a nearly 7-month high with the CAD yesterday, along with its fresh 31-month high with the single currency today.  Halifax HPI MoM on tap Friday morning is the only data left for the UK this week, but politics and Brexit remain front and centre for now.

The Dollar improved to its two-day high versus the Japanese Yen on increased risk tolerance after the USDJPY rate fell one whole Yen after it rose to its six-month high on Friday morning, but fell to its fresh one-month low versus the Swiss Franc yesterday morning. The Buck actually rose from its  three-week low with the Aussie from Tuesday morning on worse than expected Australian GDP QoQ at +0.4% versus +0.5% consensus forecast o Tuesday evening followed by  Retail Sales MoM  at 0.0% compared +0.3% target and Trade Balance at 4.50B versus 6.5B consensus last night. However, the NZDUSD rose to its new 4-month peak on USD weakness coupled with risk-on trading factors. The Buck fell off its 41-day peak with the Chinese Yuan form yesterday morning after the Bloomberg report indicating that both the US and China indeed are still targeting 15 December for a concrete deal.  The key Swiss Retail Sales YoY was released at +0.7% versus +0.8% forecast whilst Manufacturing PMI figure was also exactly on target at 48.8 target on Monday while the key CPI MoM release was as expected at -0.1% on Tuesday. Japanese Average Cash Earnings nd Household Spending YoY are scheduled for this evening while Swiss Foreign Currency Reserves are on tap Friday early morning.

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