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Global Market Watch - 6th December 2019

The pound continued its recent strong run across the board, as the polls again showed a steady Tory lead and four Brexit Party’s MEPs quit their party and backed the Tories. It seems like voters who want to leave the EU will mostly vote for the conservatives, while the remain vote will be split between the Labour Party and Liberal Democrats. We look to this evenings last TV debate between PM Johnson and Labour leader Corbyn for further direction.

German factory orders fell 0.4% and disappointed alongside retail sales, which fell 0.6%, more than the -0.4% predicted. However, the market was positive as revised GDP grew as expected by 0.2%, which supported EUR/USD. Paris was basically brought to a standstill by strikers protesting against pension reforms, but the single currency was unmoved. This morning German industrial production fell abruptly by 1.7% rather than the 0.1% expansion expected. So far, this has had little effect on the single currency.

The dollar index has been losing ground since the end of November. There is currently a relationship between the US equity markets and the dollar. Indeed, the greenback has been following the equity markets movements, which have been leading the dollar lower. This drop can also be associated to the US-Chinese trade talks, which seem to hit a hurdle, once again. The important date for the talks is actually December 15th, when the US is due to increase tariffs again on Chinese goods. If the tariffs are levied, then it wouldn’t be a surprise to see a lower dollar as well. The impeachment process continues, but it may well only affect the market if and when the Senate agrees with the House of Representatives, which is very unlikely. As for today, we look to the Non-farm payrolls and average earnings. We expect 170k new jobs to have been made in November and average earnings to have increased by 0.3%.
Canadian Ivey PMI data for November was an excellent 60.0 and beat October’s reading of 48.2. Interestingly, Bank of Canada’s Lane commented that if inflation was persistently below target, then the central bank would cut rates. Canadian inflation is currently 1.9% and Canadian employment data is released this afternoon.

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