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Global market watch - 21st February 2019

USD  
The Dollar managed to recover some of its losses from yesterday late in the afternoon and overnight but was sold again this morning after worse than expected domestic economic data at 8:30am. Durable Goods Orders MoM was released at +1.2% headline compared to+1.6% consensus forecast while the core number was also 0.2% worse than its target at +0.1% today.  The Philly Fed Manufacturing Index was much worse than expected at its December 2015 low of -4.1 compared to the +14.1 forecast which is also much worse than the +17.0 previous reading for last month. The Greenback traded lower ahead of the release of the FOMC Meeting Minutes yesterday which elicited a mixed response yesterday.  While there has been some increased dovishness in recent months, with Federal Reserve Bank policymakers acknowledging concerns about slowing global growth potentially aggravated by the Chinese slowdown largely due to the trade war, there is likely to still be at least one FOMC rate increase for this year.  Indeed, Federal Reserve Bank Vice Chair Richard Clarida commented that he is not sure the US economy is actually slowing down while also stating that he does not see any scenario where the Fed actually does not hike rates at least one time this year.

The Greenback is trading in striking distance of its respective two-week lows versus the Euro and Loonie from yesterday, is within a few points of its three-week low versus the Pound from yesterday, was largely sideways in its pairing with the Japanese Yen after USDJPY touched a five-day peak yesterday, but fell back toward its 15-day trough against the Swissy from yesterday morning, hit a two-day high versus the Mexican peso overnight, but fell to a seven-month low against the CNY on the reports that US officials requested the Chinese government not to devalue the currency during key trade negotiations.  The Dollar improved to a one-week high versus both the Aussie Dollar and Kiwi overnight as the antipodeans were sold despite strong oil and precious metals prices coupled with firm Australian employment data, on news that Australian lender Westpac was the first major Australian bank to predict the RBA would actually cut rates twice during this year. 

Domestic Flash Manufacturing and Services PMI data is on tap shortly followed by the release of Crude Oil Inventories after that.

CAD
The Canadian Dollar is trading in striking distance of the two-week high it managed against the Greenback yesterday as WTI Crude Oil touched another three-month high today.  That said, EURCAD bounced up form a five-day low yesterday while GBPCAD also rose as the British Pound was generally stronger. Canadian Wholesale Sales MoM came in much better than anticipated at +0.3% actual compared to -0.2% consensus forecast, while the ADP Non-Farm Employment Change figure was released at an impressive +35.4k but the previous number was revised down sharply to -20.9K form -13.0K also. The Loonie did manage to essentially match its two-month high versus the Yen from yesterday while it also hit a one-week high against the Swiss Franc as risk appetite remained firm.  Traders will be tuned in to Bank of Canada (BoC) Governor Stephen Poloz during his speech on monetary policy at the Chamber of Commerce of Metropolitan Montreal at midday.

EUR
The Euro remains in striking distance of the two-week peak it touched versus the Buck yesterday but EURUSD has been in generally tight ranges.  The single currency did improve from its five-week low in its pairing with the Loonie from yesterday but dropped to a 23-day rough against the broadly firmer Sterling today.  The key European Central Bank (ECB) Monetary Policy Meeting Accounts reflected policymakers concerns about slowdown in Eurozone growth and inflation, even discussing “potential new operations” to supply liquidity to euro area banks despite the ECB only ending its asset purchases at the end of last year. This notion is markedly dovish amid previous expectation of rate tightening in August or September and only enhances broader concern regarding the stat of the EU at this time. Eurozone Flash Services PMI was better than expected at 52.3 compared to 50.3 but the Flash Manufacturing PMI was a concerning 49.2 this morning which is under the key 50 expansion versus contraction level which fueled concerns about a broad euro area slowdown.  Meanwhile, the release of German Final CPI MoM was on target at -0.8% but still negative while the French Final CPI MoM was 0.1% better than forecast at -0.4% today. While these fundamentals are negative the single currency still firmed a bit versus the Buck and Loonie today.
 
GBP
The British Pound managed to rally across the board as Brexit sentiment improved a bit on reports that Prime Minister Theresa May and European Commission President Jean-Claude Juncker issued a joint statement that discussions were “constructive” along with the Spanish Foreign Minister had sated that an agreement was being “hammered out” also.  Sterling Public Sector Net Borrowing was better than anticipated at -15.8B compared to -11.1B forecast consensus which is much better than +2.1B for the reading last month. The better than expected CBI Industrial Order Expectations yesterday along with generally firm employment data on Tuesday morning as well.  There is no more data on tap for the UK this week, so the focus moves back completely to Brexit at this time.

RoW
The Buck managed a one-week high versus the Aussie Dollar and Kiwi overnight before paring back those gains on the worse than expected US Durable Goods Orders MoM and Philly Fed Manufacturing Index this morning.  It was reported overnight that major Australian Bank Westpac was the first big lender in the country to predict that the Reserve Bank of Australia (RBA) would cut rates twice this year which put major pressure on the antipodeans despite strong Australian employment data, firmer oil and precious metals prices, along with risk on trading also.  Australian Employment Change was an impressive +39.1k compared to +15.2k forecast while the Unemployment Rate came in at +5.0% also.

The Japanese Yen improved versus the broadly weaker Buck this morning despite falling against most other majors on generally firm risk tolerance.

The Swiss Franc improved back toward its 15-day high versus the Greenback this morning after the US data came in worse than expected mirroring EURUSD trading higher.

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