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Global market watch - 11th February 2019

USD

The Buck rallied further overnight against most of its rivals in a flight to quality as the US economy continues to outperform its peers at this time, ahead of key trade talks with China this week as the March 1 deadline approaches.  Markets expect some progress in talks as President Donald Trump seems to need a political win and Chinese Premier Xi Jinping is facing an economic slowdown partially attributable to the US tariffs.  Meanwhile, investors everywhere continue to purchase higher yielding US debt and more resilient domestic equities as global uncertainty mounts.  The one glaring exception is the Loonie which is largely sideways versus the Buck in the wake of excellent Canadian employment data on Friday morning, but USDCAD remains in striking distance of the two-week high it touched prior to the Canadian employment release on Friday at the moment.   The Buck is trading at a fresh 19-day high in its pairing with the Euro this morning, its Thursday best versus the British Pound after a slew of soft UK data this morning, a three-month best against the Swiss Franc this morning, a fresh 45-day high against the Japanese Yen, close to its one-month peak versus the Aussie Dollar and 17-day high against the Kiwi on Friday morning, sideways in tis pairing with the Mexican peso this morning, while USDCNY is at a 19-day high as well.  Domestic economic data this week includes Federal Reserve Bank Chair Jerome Powell speaking tomorrow, the key CPI MoM number on Wednesday,  Retail Sales, PPI, and Business Inventories on Thursday, followed by the Empire State Manufacturing Index along with Industrial Production MoM on Friday morning.

CAD

The Canadian Dollar is largely sideways versus the generally firmer Greenback despite WTI Crude Oil essentially matching its 10-day low from Thursday overnight as the CAD was supported by excellent domestic employment data on Friday morning at +66.8K versus only +6.5K forecast consensus which also was much better than 9.3K previous. The lagging Unemployment Rate did rise 0.1% to 5.8% but this is still an impressive level for the figure. That said, the USDCAD level is in striking distance of its 2-week high right before the data release on Friday.  The Loonie is trading at a five-day high in its pairing with the Euro while currently at a four-day best versus the Pound also. There is a light data week ahead with only Manufacturing Sales MoM along with NHPI MoM followed by Foreign Securities Purchases Friday morning.

EUR

The single currency is trading at a 19-day trough versus the Buck this morning, its five-day low in its pairing with the Canadian Dollar at the moment, but did rise to a four-da peak against Sterling today. Both the European Central Bank (ECB) and EU Commission have both expressed downside risks to the economy of late, with the commission slashing Eurozone growth forecasts broadly last week.   While EURUSD is lower, the single currency has been resilient at key support levels on technical factors but there is renewed pressure as market participants’ apprehensions of a potential recession in the EU grow stronger amid a slew of negative data releases of late.  The Eurogroup Meeting today is followed by a speech from German Buba President Weidmann ahead of the ECOFIN meetings tomorrow.   Eurozone Industrial Production MoM is on Wednesday morning, the Eurozone Flash GDP QoQ data following German Preliminary GDP QoQ on Thursday morning, with Trade Balance on Friday morning.

GBP

The Pound was sold this morning to a four-day low versus the Dollar, Loonie, and Euro after several negative economic releases out of the UK this morning.  Key GDP MoM was a disappointing -0.4% this morning compared to 0.0% forecast consensus and +0.2% previous, while the Preliminary GDP QoQ was 0.1% below target at +0.2% today.  Manufacturing Production MoM came in at -0.7% versus +0.2% consensus, the Construction Output MoM was a nearly one year low of -2.8% compared to +0.2% consensus today, Industrial Production MoM was -0.5% amid +0.1% target, while the Goods Trade Balance number was essentially as expected at -12.1B compared to -12.0B today.  Brexit uncertainty continues to be the main issue for Sterling as the key vote approaches with Prime Minister Theresa May attempting to make headway on the Irish border issue now but – on what should be a positive note for the British Pound – the expectation of an extension to Article 50 is growing.  BoE Governor Mark Carney is scheduled for a speech tomorrow, key inflation data including CPI YoY is on tap for Wednesday, with Retail Sales MoM data on Friday morning.

RoW

The Greenback is trading in striking distance of its one-month peak versus the Aussie Dollar on Friday morning while just a hair lower than its 17day best against the Kiwi today ahead of key talks expected between the US and China regarding trade this week.  Despite generally healthy risk appetite overnight, oil, gold, and copper prices slumped weighing on the antipodeans today. The key Reserve Bank of New Zealand (RBNZ) monetary policy meeting is tomorrow night, with Australian NAB Business Confidence this evening and Westpac Consumer Sentiment tomorrow.

The Yen is trading broadly lower on firmer risk tolerance in markets as it hit a 45-day low versus the broadly firmer Buck this morning, along with a 4-day low in its respective pairings with the Euro and Loonie today amid a Bank Holiday in Japan to begin this week.

The Swiss Franc touched a fresh three-month low versus the Dollar overnight on worse than expected Swiss CPI MoM, an uptick in risk tolerance, along with the generally softer Euro as well.  CPI Mom was 0.1% lower than expected at -0.3% today. Swiss PPI MoM on Thursday morning is the only data piece left this week. 

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