USD
The Buck is trading a bit stronger against most of its rivals ahead of the US Memorial Day holiday on Monday.  The Greenback is trading a bit stronger against the Euro, Swissy, Sterling, and Mexican Peso, hit a fresh 16-day peak versus the Loonie,  and ticked up to a three-day high versus Aussie. That said, the Greenback is largely sideways against the rallying safe-haven Yen – although USDJPY is up from a fresh 17-day low yesterday - on heightened global political uncertainty as the President cancelled the US summit with North Korea yesterday afternoon and the US announced an investigation into potential auto tariffs in regards to NAFTA talks.  It is not a huge surprise that President Trump cancelled the US summit with North Korea amid several threats in the past few days from the rogue state to cancel the summit themselves, but it ultimately adds to global political concerns given the new populist government in Italy, Turkish currency crisis, US trade tariffs, and the recent exit from the Iran nuclear treaty as well. The President did leave the door open to have the summit at "a later time .... if and when Kim Jung Un chooses to engage in constructive dialogue and actions" so this could be part of a negotiation tactic in the medium term.

The Buck and US 10-year Treasury yields came under some pressure yesterday as a result of a hint of dovishness in Wednesday's Fed Monetary Policy Meeting Minutes on further inspection.  The market reacted very positively to Wednesday's FOMC Meeting Minutes upon release, especially with Cleveland Fed President Mester's comments that four rate hikes could happen this year, but ultimately have digested a hint of dovishness in comments that the Fed policymakers could tolerate inflation above 2% for a short time reflecting their gradual tightening approach.  This seems a bit peculiar as the FOMC is so much more hawkish than any other major central bank, but US Treasury yields - while still elevated - were a bit lower as a result which weighed on the Dollar yesterday.  That said, the Buck managed to recover overnight. US Durable Goods Orders MoM are set for release this morning.  Federal Reserve Chair Powell is set to speak in a short while, which will likely garner special attention following the market perception of some implied dovishness in the FOMC Meeting Minutes from Wednesday afternoon.

CAD
The Canadian Dollar fell to a fresh 16-day trough in its pairing with the Buck on plummeting oil prices, rising risk aversion, and the announcement of a US investigation to explore potential auto tariffs in regards to NAFTA negotiations.  Prime Minister Justin Trudeau commented this this was based on “flimsier logical grounds” as imposing such punitive tariffs could cause chaos for the Canadian auto industry.   Indeed, both Toyota and Daimler AG unsurprisingly criticized the idea of automobile tariffs as well.  The notion of US protectionism is dangerous for Canada but most participants ultimately believe there will be a fair resolution to NAFTA at the moment.  There is no Canadian data today.   All eyes are on the Bank of Canada (BoC) meeting next Wednesday however.

EUR
The Euro fell versus the Buck overnight after it rose in its pairing with the US Dollar yesterday The Single currency had enjoyed some buying yesterday as China’s Premier Li Keqiang gave a long-term vote of confidence in the Euro, announcing that China is a long-term investor in the Single currency and that they hope it remains strong and steady. This provided a small boost, but concerns persisted regarding the political situation in Italy, muted growth and inflation data, along with the latest ECB minutes. The German Ifo Business Climate release was a touch above target at 102.2 versus 102 forecast.  There is no other significant hard data for the Eurozone this week, but the ECOFIN meetings are happening today

GBP
The British Pound fell in its pairing with the Buck after yesterday's modest rally despite on target UK Second Estimate GDP QoQ at +0.1% today, as Preliminary Business Investment QoQ which was released at -0.2% compared to +0.2% forecast consensus.  Sterling enjoyed a good start to the day yesterday on the better than expected UK Retail Sales data at +1.6% compared to +0.8% forecast, which was much better than -1.1% previous.  Continued Brexit uncertainty coupled with lower expectations for Bank of England (BoE) interest rates are putting pressure on Sterling overall.  BoE Governor Mark Carney is scheduled to speak along with Fed President Jerome Powell at 9:20am ET today.

RoW
The Aussie Dollar and Kiwi both fell versus the Buck overnight on falling oil prices combined with market risk aversion, and despite higher gold and copper prices.  The US cancellation of the denuclearization summit with North Korea pushed risk appetite lower and also heightened political concerns in Asia.   There was no data for the antipodean economies today.

The Japanese Yen was largely sideways with the higher Buck– although USDJPY is off the fresh 17-day low it hit yesterday – as the Yen benefited from risk aversion coupled slightly lower US 10-year Treasury yields.  Tokyo Core CPI YoY was a touch lower than forecast at +0.5% compared to +0.6% consensus/previous.  USDJPY has fallen quite a bit from its peak last week as broad global political concerns have increased investor fears.

The Swiss Franc fell off from yesterday’s 24-day low versus the Buck on a weaker Euro combined with general USD strength and despite continued risk aversion overnight.

USD
The US Dollar is a touch lower against most of its rivals this morning on global political uncertainty after rallying to a fresh nearly 6.5-month peak against the Euro (November 14) and nearly 5.5-month (December 15) peak in its pairing with the Pound yesterday.   The Buck continues to trade very strong against Euro and Sterling despite the modest retracement overnight, but also fell to a fresh 23-day low versus Swissy and 10-day low in its pairing with the Yen today.  The Buck is largely sideways against the Loonie, Aussie and Kiwi as the risk weighted Commodity Currencies are also under a little pressure from the risk-off trade.  Global political tensions were elevated as North Korean officials cast more doubt on the potential summit with the US overnight, Italy’s new populist government is causing significant concerns for the EU, the recent collapse of the Turkish Lira, and the US exit from the Iran nuclear treaty.  US Economic factors were generally positive yesterday, with Flash Manufacturing PMI on target at 56.6 and Flash Services PMI a bit better than expected at 55.7 compared to 54.9 forecast.  More importantly, the FOMC Monetary Policy Meeting Minutes pushed the Buck higher yesterday afternoon as the acknowledged another Fed rate hike was likely “soon,” and Cleveland Fed President Loretta Mester commented it was “marginal” whether the FOMC would raise rates three or four times this year.  Interestingly, the 10-year US Treasury yield did retrace a bit overnight despite these comments. We have US HPI MoM later this morning.

CAD
Canadian Dollar traded up from a near 8-day low yesterday versus the Buck yesterday, and remains in striking distance of yesterday’s 4.5-month high in its pairing with the Euro from the afternoon.  USDCAD has been in fairly tight ranges since the end of April, as Loonie has rallied against many on strong oil prices, generally improved sentiment regarding NAFTA, and increasing expectation of an upcoming Bank of Canada (BoC) rate hike while the Buck has rallied on the back of strong yields and solid US economic data keeping the Loonie on relatively firm footing with the otherwise rallying Greenback.  Canadian Corporate Profits QoQ came in at 2.7% this morning which was much better than -1.9% previous in a light data week for Canada overall.

EUR
The Euro is trading a bit higher versus the Buck this morning after falling to a fresh 6.5-month low yesterday.   While EURUSD is a touch higher today on a modest USD retracement, the single currency has been under significant pressure due to the populist government in Italy combined, muted inflation and growth data, and the unlikelihood of any significant ECB tightening policy in the foreseeable future. Deutsche Bank announced it intends to cut between 7.000 and 10,000 jobs, and the front runner for Italy’s Finance Minister is Paolo Savona who called Italy’s membership in the Euro a “historic error” in the past.  On a bright note, German GDP QoQ was on target at +0.3% and GfK Consumer Climate was essentially on target at 10.7 compared to 10.8 consensus and previous.  The ECOFIN Meetings are scheduled for tomorrow.

GBP
The Pound improved from a fresh 5.5-month low against the Buck on the modest USD selloff coupled with a better than expected UK Retail Sales data release at +1.6% compared to +0.8% forecast consensus.  BoE Governor Mark Carney and New York Fed President William Dudley urged banks to prepare a move away from the Libor due to past scandals. While Sterling received a bit overnight, the Pound remains under pressure as a result of sliding inflation data combined with Brexit uncertainty.   At the moment it seems that Prime Minister Theresa May is likely to proceed with her Brexit plan as it is unlikely that hardcore Brrexiteer MPs will elect to try and force an election and risk a Labour government.  UK Governor Mark Carney is speaking with Fed Chair Jerome Powell tomorrow morning.

RoW
The Aussie Dollar and Kiwi were both sideways versus the Buck as gold and copper prices rallied but risk aversion weighed on the Commodity driven antipodean currencies.  The New Zealand Trade Balance  was better than expected at 263M compared to 200M forecast which was a significant improvement to the disappointing negative revision for last month from -86M to -153M.  There was no significant data for Australia overnight.

A significant focus for the market over the past 24 hours has been the Turkish Lira. After the warning from Fitch over political interference in monetary policy, the Lira slumped 5% against the US Dollar. Late yesterday the central bank hiked rates by 3% to 16.5% and this halted the slide temporarily. However, USDTRY has slumped 3% already this morning. There are elections in Turkey on June 24th, which President Erdogan is slated to win and as he has been firmly against rate hikes it is possible that the only real tool that the central bank has against inflation will be denied to it. This currency crisis is probably set to continue for some time.

The Japanese Yen rallied to a 10-day peak against the US Dollar and a nine month high in its pairing with the Euro as risk aversion and a small drop in US yields supported the safe-haven currency.

The Swiss Franc touched a fresh 24-day high against the Buck on risk aversion coupled with the general modest USD selloff overnight.

USD
The Buck was broadly higher against all of its rivals except the Yen and Swissy which both rallied on significant market risk aversion.   The US Dollar was supported by the US 10-year Treasury yield rallying back up to its seven year peak, the Chinese announcement that they will ease back tariffs on car imports from 25% to 15% yesterday, and the fact that Congress voted to ease Dodd-Frank rules late yesterday.  The Greenback rallied to a nearly 6.5-month (November 14) high against the Euro, a fresh 5-month peak against Sterling after a miss on UK CPI YoY, within a few pips of an 8-day high in its pairing with the Canadian Dollar, within striking distance of Monday’s 15-month peak versus the Mexican Peso, and was higher against the Aussie Dollar as well.  However, the Dollar fell to a 9-day low versus Yen and 23-day trough against the Swiss Franc on market risk aversion as market participants are apprehensive the summit with North Korea may not happen and equity markets were broadly lower.  We have the key Fed Monetary Policy Meeting Minutes this afternoon, along with US Flash Manufacturing and Services PMI later this morning.

CAD
Canadian Dollar fell within a few ticks of an 8-day low versus the Buck, as oil prices pulled back a bit, the recent news that NAFTA talks have stalled on US Auto demands, and the risk weighted Commodity Currencies pulled back on lower equities coupled with concern over the potential cancellation of the US-North Korea summit.   It seems that most experts feel positive there will be a productive resolution to keep the treaty alive, but there is some concern about US demands in reference to the automobile industry and many feel that negotiations could extend into next year.   Assuming there is no resolution in the near term, the looming issue could be a concern for the Canadian economy and the BoC interest rate outlook.  Canadian Wholesale Sales MoM were released at 1.1% yesterday which was better than +0.8% forecast consensus, with a strong upward revision to -0.4% from -0.8% for last month.  There is no Canadian data today with Corporate Profits QoQ tomorrow, and nothing else in a light data week.

EUR
The Euro fell to a fresh 6.5-month low in its pairing with the US Dollar after European Central Bank (ECB) policymakers expressed concerns about Core inflation and the Italian budget deficit yesterday and today.  ECB Policymaker and Finland’s Central bank Governor Erkki Liikanen said that it will take time before core inflation would support general inflation development.  This implies that, as many traders had expected, the ECB will not raise rates unless core inflation increases.  ECB’s Coeure stated that Italy should respect EU fiscal rules but did comment that it was “too early” to directly asses the new populist Italian government’s plan.  Meanwhile, European Union Commissioner Valdis Dombrovskis said the Italy must keep its budget deficit under control, while EU Commissioner Cecilia Malmstrom commented yesterday that the US views the latest EU trade proposal as insufficient.   In addition, both EU Flash Services and Manufacturing PMI were a touch lower than expected this morning at +53.9 versus +54.7 and +55.5 compared to +56.1 respectively.  We do have Eurozone Consumer Confidence later this morning, with German Final GDP QoQ. The ECB Monetary Policy Meeting Minutes, and the ECB Financial Stability review tomorrow.

GBP
The Pound fell to a fresh 5-month low versus the US Dollar, and an 8-day trough against the Euro as a result of a miss in UK CPI YoY – amongst other lower than expected inflation data today -  combined with Bank of England (BoE) Governor Mark Carney’s assessment of Brexit on the UK economy yesterday.  UK CPI YOY came in at +2.4% compared to +2.5% forecast, and the Core CPI YOY was also 0.1% less than expected at +2.1% today.  It is not just a miss, but the downward trend of the 3.0% release in February, +2.7% in March, and then +2.5% in April reflecting weakening UK inflation.  UK HPI YOY, and PPI Input MoM also missed their mark, while RPI YoY and PPI Output MoM were on target.   BoE Governor Carney asserted yesterday that the UK economy is already 40B GBP smaller as a result of Brexit and this could become worse over time.   On a bright note, UK Foreign Minister Boris Johnson did rule out a snap election.  That said, the uncertainty around Brexit coupled with softer inflation data is weighing on Sterling significantly.

RoW
The Aussie Dollar and Kiwi both ticked down versus the Buck on the USD rally, softening oil prices, and risk appetite overnight.  Further an RBNZ paper outlining what type of QE the NZ central bank could adopt if necessary weighed on the antipodean currencies.   The Australian MI Leading Index MoM was released at +0.2% which matched the downward revision for last month while Construction Work Done QoQ was much worse than expected at +0.2% compared to +1.1% forecast consensus.

The Japanese Yen rallied to a 9-day high against the Dollar, a 9-month peak in its pairing with the Euro, and  2.5-month high versus Sterling on increased risk aversion reflected by lower equities and partly caused by the potential cancellation of the US Summit with North Korea in the near future. 

The Swiss Franc improved to a 23-day high against the US Dollar and 2.5-month peak versus the Euro overnight on risk aversion reflected by broadly lower equity prices.

USD

The US Dollar is trading on firm footing to start the week as it hit a fresh six-month peak in its pairing with the Euro, five month high versus Sterling, a four month peak against the Yen, and a fresh 15-month high versus the Mexican Peso.  Strong US yields coupled with mounting expectation of a perceived “win-win” trade deal between the US and China in the near future supported the Buck in a relatively light market with Bank Holidays in Germany, France, and Canada today.  Meanwhile, the commodity driven Loonie, Aussie, and Kiwi ticked just a touch higher against the generally strong Greenback on elevated oil and copper prices coupled firm risk appetite.  There is no US Data today but FOMC Member Bostic is speaking at 11:30am this morning.  It is a relatively light data week for the US which is highlighted by the Fed Monetary Policy Meeting Minutes on Wednesday afternoon.  In addition, we do have the Richmond Fed Manufacturing Index tomorrow, US Flash Services and Manufacturing PMI data Wednesday morning, HPI MoM along with Existing Home Sales on Thursday, and US Durable Goods Orders on Friday morning.  In addition, FOMC Chair Jerome Powell and BoE Governor Mark Carney are speaking at 9:20am on Friday morning.

CAD

Bank Holiday

Canadian Dollar ticked up just a touch against the generally stronger US Dollar as oil prices continue to trade close to their November 2014 peak amid OPEC meetings today.   Oil prices are down just a touch at the moment, but the high level is supported by looming US sanctions against Iran given the exit from the Obama Iran deal combined with falling Venezuela production given a worsening financial crisis there.   The Loonie is further supported by Friday’s on target headline CPI release coupled with better than expected headline Retail Sales MoM, despite the sharp drop in Core Retail Sales MoM.   In general, Canadian data has certainly been strong enough to support the one or two Bank of Canada (BoC) rate increases expected this year.  It is a very light data week for Canada with a Bank Holiday today, the Wholesale Sales MoM release Tuesday, and only Corporate profits QoQ Thursday morning.

EUR

German Bank Holiday

French Bank Holiday

Netherlands Bank Holiday

The Euro fell to a fresh six-month trough in its pairing with the Dollar overnight as the market continues to be concerned about weak EU growth and inflation combined with growing concern about the new Italian ruling coalition. The new government agreement between the League and 5 Star Movement promises to increase Italy’s government budget by 100B Euros with Italy’s National Debt already being about EUR 1.5TT and one of the highest debt to GDP levels in the Eurozone.  Moreover, the new government is looking to forcibly expel 500,000 migrants which goes directly against the German open-door policy.  While the EU has the ability to fine Italy for exceeding agreed upon budget limits it did let Spain off in a similar situation a few years ago.   What is perhaps even more concerning is the reported potential issuance of short term “mini BOT” government bonds to pay companies owed by the State domestically which has been described as “a plan to circulate a disguised parallel currency” by the Italian government.  Either way this is highly controversial and could be seen as an attempt to circumvent monetary policy controls.  It is a relatively light Eurozone data week with holidays in much of the EU today, including Germany, France, and the Netherlands, the German Buba Report tomorrow, EU Flash Manufacturing and Services PMI tomorrow, the key ECB Monetary Policy Meeting Minutes after German Final GDP QoQ on Thursday, and the ECOFIN Meetings on Friday.

GBP

The British Pound fell to a fresh 5-month low in its pairing with the Buck overnight as recent soft UK inflation data coupled with Brexit uncertainty have weighed on Cable given firm US yields.   We have some key UK inflation data this week, with CPI YoY, HPI YoY, PPI MoM, and RPI YoY on Wednesday followed by UK Retail Sales on Thursday.  Bank of England Governor Mark Carney is speaking on Thursday morning and with FOMC Chairman Powell on Friday morning.  Further, UK Second Estimate GDP QoQ is on tap for Friday morning along with Preliminary Business Investment QoQ as well.  The Brexit situation seems to be getting more complex at the moment.  UK Prime Minister Theresa May’s lasts approach is for the UK to remain in the customs union until technology supports a seamless border between the EU and UK.  This could take a considerable period of time and aggravate hardline Conservative Brexiteers in her own party.  That said, it seems the majority of parliament wants to remain in the customs union, and, indeed, the House of Lords has delivered 15 defeats to the Brexit bill.  This could ultimately lead to another election in the UK this fall assuming no resolution.

RoW

The Aussie Dollar and Kiwi were a touch stronger against the generally frim Buck overnight as oil prices, while falling a touch, remain elevated, copper prices spiked overnight, as risk appetite remained firm.  NZ Retail Sales were worse than expected at +0.1% headline compared to 1.0% forecast with the Core figure coming in at +0.6% versus +1.1% consensus.  We have the Australian MI Leading Index MoM on Tuesday night with Reserve Bank of Australia (RBA) Governor Philip Lowe speaking on Wednesday overnight and the New Zealand Trade Balance on Wednesday night Eastern Time also.

The Japanese Yen hit a fresh four-month low in its pairing with the US Dollar on strong risk appetite coupled with firm US Treasury yields.  The Japanese Trade Balance was better than anticipated at 0.55T compared to 0.11T consensus, with an upward revision to 0.17T from 0.12T for last month.  The BoJ Core CCPI YoY release is due overnight with Japanese Flash Manufacturing tomorrow evening, and Tokyo Core CPI YoY on Thursday night.

The Swiss Franc was actually just a hair stronger in its pairing with the Dollar amid a Bank Holiday in Switzerland and ahead of no domestic data this week. 

USD
The US Dollar continues to trade on firm footing, but somewhat mixed, this morning as the US Treasury Bond Yield touched a fresh seven year high.  The US Industrial Production MoM was better than forecasted, but the Buck was tempered a little bit by a slightly more dovish speech than expected from St Louis Fed President Bullard coupled with tweets from President Donald Trump on China trade and the North Korea Summit yesterday. FOMC Member Bullard was critical about Fed policy which could contribute to the inverted yield curve we are seeing right now.   He specifically said that “if we go too aggressively to the point where we invert the yield curve I would take that as a very negative signal, and our risk of recession would go up.”  That said, it is unlikely the Federal Reserve Bank will shift from its gradual tightening policy, and this is reflected by higher yields.

The Greenback is trading at a fresh  4-month high in its pairing with Yen now, is a bit higher against the Swiss Franc,  and remains close to its 5-month peak versus the Euro from yesterday.  While the USD is a touch weaker against Sterling, it remains at a strong level against the Pound.  The Commodity Currencies managed to rally against the Buck in tight ranges as oil prices hit a fresh November 2014 peak coupled with firm risk appetite. The Loonie hit a one week peak against the US Dollar while both Aussie and Kiwi are trading at three day highs against the Greenback.   

The Philly Fed Manufacturing Index came in at 34.4, a one year high, compared to 21.1 forecast consensus, and the CB Leading Index MoM is scheduled for later this morning.

CAD
The Canadian Dollar is trading at a one week peak versus the Greenback, a four month high in its pairing with the Euro, and a 3.5-month peak against the Yen as Brent Crude Oil Futures hit a fresh November 2014 peak coupled with the recent frim Canadian economic data. Market participants are pricing in a 76% chance of a Bank of Canada (BoC) rate increase in July, an 87% probability in September, and a 96% expectation for October at this point with more than a third of the market expecting two rate hikes by the end of this year.  Foreign Securities Purchases were better than expected at 6.15B compared to 3.00B consensus, and Canadian ADP Non-Farm Employment Change was released at 30.2K versus 42.8K for last month.  The key Canadian CPI and Retail Sales data are scheduled for tomorrow.

EUR
The single currency remains close to yesterday’s five month low against the Buck, is trading at a four-month trough in its pairing with the Loonie, and fell to a three-week low versus the British Pound today.  While Eurozone and German CPI yesterday were on target, the soft numbers were more of a reminder of muted EU growth and inflation than anything else.  With EU CPI YoY at +1.2% headline and +0.7% core it is highly unlikely for the European Central Bank (ECB) to tighten monetary policy in any significant way in the foreseeable future.  In addition, the Italian bond and equity markets has started to become unsettled regarding the political situation there.  There is no major Eurozone data out for today but we do have EU Current Account, Trade balance, and German PPI on tap Friday morning. 

GBP
The British Pound recovered a bit after trading within a few points of Tuesday’s 4.5-month low versus the Buck yesterday, and moved up to a three-week peak against the soft unified currency overnight.  The UK CB Leading Index MoM was released at -0.2% which is better than the upward revision to -0.3% for last month.  Sterling improved despite increased Brexit uncertainty, and the House of Lords 15th defeat of the government’s Brexit bill yesterday.  The customs union and Irish border issues continue to be a sticking point, with the EU deadline for the end of next month looming. 

RoW
The Aussie Dollar and Kiwi both rebounded to the respective three days highs against the Greenback overnight as surging oil price, better than anticipated Australian Employment Change, and firm risk appetite boosted the Antipodean Commodity Currencies in tight ranges with the Buck. Australian Employment Change was released at 22.6K compared to 19.8K forecast, but the Unemployment Rate rose by 0.1% to 5.6% as well.  NZ PPI Input QoQ was released at +0.6% compared to +0.3% consensus. 

The Yen fell to a fresh four month low versus the Greenback on rising US Treasury yields and firming risk appetite on the overnight session. 

The Swiss Franc softened a bit on firmer risk appetite combined with a weakening Euro this morning.  In addition, Swiss National Bank (SNB) Chairman Thomas Jordan speaking on the harmful potential that the SNB would become politicized on the sovereign money initiative was not great news.  On a bright note, the SNB is now expected to raise its rate from -0.75% to -0.50%in Q3 2019 instead of Q4 of next year as was previously anticipated.

USD
The Greenback sold off a bit against many of its rivals after hitting a six month high versus Euro, five month peak against Sterling, and four-month high in its pairing with the Yen yesterday.  While the Buck remains on solid footing against most of its rivals, it did fall back to Thursday’s level against the Euro and Loonie, dropped to a one-month trough in its pairing with the Aussie Dollar, an 11-day low against the Kiwi, fell to a three-week trough in its pairing with the Swiss Franc albeit in tight ranges, and pulled back just a touch versus the still generally weak Yen and Sterling.   Technical trading, including some profit taking, weighed on the US Dollar and soaring oil, gold, and copper prices coupled with firming expectations of a favorable resolution to both NAFTA and US-China trade boosted the Commodity Currencies in particular.  Interestingly, the Buck gained some strength yesterday when Treasury Secretary Steven Mnuchin conveyed that a strong Dollar was good for the US in the long term after extolling the virtues of a weaker currency a few months ago. The Richmond Fed Manufacturing Index is set for release this morning with no other data on tap.

CAD
Canadian Dollar ticked up to Thursday’s one-week peak in its pairing with the US Dollar on soaring oil and gold prices combined with positive sentiment over a favorable NAFTA resolution, and firm expectation of Bank of Canada (BoC) policy tightening in the foreseeable future. Indeed, the Loonie rallied to a fresh nearly 4.5-month high (January 11) in its pairing with the Euro, a 4-month peak versus the British Pound, and a 3.5-month high against the Yen as well.   The Canadian Wholesale Sales MoM data release is set for this morning.

EUR
The Euro ticked up a touch to Thursday’s level against the Buck after EURUSD fell to a fresh six-month low yesterday, but fell to a 4.5-month low in its pairing with the Loonie. The Euro was under heavy pressure yesterday due to uncertainty about the new Italian government, a coalition between the League and 5 Star Movement,  with an outspoken anti-austerity and anti-immigration ideology coupled with the potentially dangerous “mini-BOT” challenge to the ECB’s monetary policy authority. ECB Governing Council Member Nowotny stated clearly that there is indeed “nervousness about Italian policy under the future government, but we must wait to see” what actually happens.  In addition to concerns regarding the Italian government, soft EU inflation and growth is also a persistent issue. The German Bundesbank (Buba) Monthly Report was a bit mixed today stating that German economic growth seems to be picking up again this quarter, after a softer Q1, with the economic boom largely continuing.  That said, the Bundesbank also noted that underlying momentum has slowed and they believe that business sentiment reflects the economy will not reach last year’s strong growth.  There is no data other than the report today.

GBP
The British Pound ticked up a touch versus the Buck after Cable fell to a fresh 5-month low yesterday.  That said, Sterling did fall to a fresh 4-month low in its pairing with the Canadian Dollar, along with a one-week trough versus the Euro as well.   Bank of England (BoE) Governor Mark Carney stated that UK real households incomes are 900 £  worse than expected, which is a significant cumulative effect, due to the Brexit referendum and warned of potentially high future costs of leaving the EU as he has done many times in the past.  In addition, the BoE chief defended his current communication approach rather than adopting a more explicit one like the Fed’s recent approach.  In general, Brexit uncertainty is building both politically and economically to put pressure on the Pound, the UK economy, and the government.  UK Bookmakers are now settling lines between 2 to 1 to 6 to 1 for a UK election before year-end as a result.   Public Sector Net Borrowing was a bit better than expected at 6.2B compared to 7.2B but UK CBI Industrial Order Expectations were released at a November 2016 low point of -3 versus +2 forecast.  The focus is on UK CPI YoY for tomorrow.

RoW
The Buck fell to a one month low in its pairing with the Aussie and 11-day low against the Kiwi as a result of soaring gold, oil, and copper prices coupled with firming expectations of   a reasonable solution to the US-China trade conflict and solid risk appetite over the past few days.  The Australian CB leading Index MoM was +0.2% which matched the downward revision for last month and there was no key data for New Zealand overnight.  The Aussie MI Leading Index MoM is set for release this evening in a light data week for the antipodeans overall except NZ Trade Balance tomorrow.

The Japanese Yen recovered from a four month low versus the Buck yesterday as the US Dollar itself was sold off a bit on technicals.  That said, in general USDJPY remains elevated compared to recent levels.  BoJ Core CPI YoY was released at +0.5% compared to +0.6% forecast with Japanese Flash Manufacturing PMI set for this evening.

The Swiss Franc improved to a three-week peak in its pairing with the Buck overnight, as EURUSD ticked up, but USDCHF has been in very tight, elevated, ranges since the beginning of the month.

USD
The US Dollar rebounded across the board overnight on higher US Treasury bond yields, mixed but positive US Retail Sales MoM release, lessening expectation of a trade war with China, along with worse than anticipated data from Europe and the UK overnight.  The Greenback ticked back towards Thursday’s firmer levels versus the the Euro, Loonie, and Aussie, and British Pound, and Friday’s level against the Swiss Franc.  The Buck did hit a fresh 3.5-month high in its pairing with the Yen, a fresh December 28 peak in its pairing with the Mexican Peso and a five month high against the Kiwi as well.  US Retail Sales MoM was released at +0.3% for both headline and Core, which was less than the +0.4% and +0.5% respective forecasts, but there was a significant +0.2% upward revision to both previous numbers.  In addition, reports that the US would help Chinese firm ZTE that took a major hit in the wake of US sanctions underpinned confidence that there would be a resolution to the trade conflict against the US and China this avoiding the feared trade war.  The German ZEW Economic Sentiment Survey came in at a November 2012 low on, while the key UK Average Earnings Index 3m/y was worse than expected which encouraged USD purchases overnight.  The Empire State Manufacturing Index was also much better than forecast at 20.1 compared to 15.1 consensus, and 15.8 for last month.

CAD
The Canadian Dollar fell back to Thursday’s level against the Buck, but also pushed back toward Friday’s high versus the Euro and Yen this morning.  Oil prices rallied even higher, but the Commodity Currencies pulled back in general on US Dollar strength. In general the Loonie remains actually quite firm against most rivals and has been in tighter ranges with the rallying US Dollar in recent weeks than any other major currency.  That said, both the CAD and MXN fell on news that NAFTA negotiators would not meet this week, and Speaker of the House Paul Ryan noted that Congress needs a notice of intent to sign a deal by 17 May.  There is no significant Canadian data today. 

EUR
The Euro fell back to Thursday’s lows against the Greenback and Pound on stronger US government debt yields combined with an anemic German and EU ZEW Economic Sentiment Survey releases.  While both releases were close to their expected level, the German ZEW Economic Sentiment Survey at -8.2 represents the worst number since November 2012 on worries about how US trade policy will affect the export dependent German economy coupled with overall EU economic weakness.  Eurozone Flash GDP QoQ was on target at +0.4% but this is -0.2% worse than the last three releases and still points to soft EU growth and inflation.  In addition, the German Preliminary GDP QoQ was 0.1% worse than forecast at 0.3% today, and this was the worst figure since November 2016 as well.   Eurozone Industrial Production MoM was 0.1% worse than expected at +0.5% and there was a -0.1% downward revision to -0.9% for last month.  Recent EU data makes it unlikely that the European Central Bank (ECB) will significantly tighten monetary policy in the foreseeable future. EU Final CPI YoY is scheduled for release tomorrow morning with ECB President Mario Draghi scheduled to speak at the beginning of the US session.

GBP
The British Pound fell to its worst level since Thursday against the greenback on worse than expected UK employment data.  UK Average Hourly Earnings 3m/y came in at +2.6% compared to+2.7% consensus, and the +2.8% for last month.  Indeed, the 2.8% previous figure was already 0.2% worse than the 3.0% forecast then so this marks a notable downtrend in UK wage growth alongside other soft inflation indicators making it less likely that the Bank of England (BoE) will raise interest rates in the near future. The Claimant Count was also a significant disappointment at 31.2K compared to 13.3K forecast, but on a single bright note UK Unemployment did stay at 4.2% which represents at 43-year low. The Brexit front remains tense, with EU Chief Negotiator Michel Barnier commented that there has not been “much progress on talks referring to the June deadline, and the UK Secretary of State for International Trade Liam Fox stated that delays in a Brexit agreement are extremely costly for the UK economy.   Recent weakness in domestic data coupled with Brexit uncertainty are significantly weighing on Sterling at the moment.

RoW
The Aussie Dollar fell to back to Thursday’s level in its pairing with the Greenback, while NZDUSD dropped to a fresh five month low, as the RBA Monetary Policy Meeting Minutes reflected slim chances of a rate hike in the near future.  The Kiwi has been under particular pressure since RBNZ Governor Orr stated that the New Zealand Dollar should be softer last week.  The fact that NAFTA negotiators are not meeting this week factored to weaken the Loonie in its pairing with the Buck and added to Commodity Currency softness.  

The Yen fell to a fresh 3.5-month low in its pairing with the Buck, on higher US debt yields coupled with firm market risk appetite.   Japanese Tertiary Industry Activity MoM was 0.1% worse than expected at -0.3% as well.  The Preliminary GDP QoQ is scheduled for release this evening.

The Swiss Franc followed the Euro lower versus the Dollar despite better than expected Swiss PPI at +0.4% compared to +0.3% forecast which was also much better than -0.2% for last month. 

USD
The US Dollar fell to a 10-day low in its pairing with the Euro and Swiss Franc overnight, albeit in relatively tight ranges, but is largely sideways from Friday’s levels against the Pound, Yen, Loonie, Aussie, Kiwi, and Mexican peso.  The US Dollar rally stalled on Thursday after worse than expected domestic CPI data.  President Trump’s withdrawal from the Iran nuclear treaty has helped oil prices increase which has affected its pairing with the Loonie. There is no significant impact from the President arranging nuclear disarmament talks with North Korea yet, but market participants will be watching developments from this and any news about trade talks between the US and China this week.  In a fairly light domestic data week, we have US Retail Sales MoM along with the Empire State Manufacturing Index tomorrow, Building Permits and Housing Starts on Wednesday, followed by the Philly Fed Manufacturing Index on Thursday morning.  In addition, there are several FOMC speakers this week, including Mester this afternoon, then Williams tomorrow mid-day, and both Brianard and Mester on Friday morning.

CAD
The Canadian Dollar is largely sideways after pulling back from Friday’s three-week peak versus the Greenback, but remains quite strong on oil prices hitting fresh multi-year highs, expectations of a favorable resolution to NAFTA talks, and firming expectations of rising Bank of Canada (BoC) interest rates.  The Loonie was actually largely unchanged after Friday’s much worse than expected Canadian employment report.  The Canadian Employment Change release came in at -1.1K compared to +17.8K consensus, and +32.3K previous.   The Unemployment Rate unchanged at 5.8% as predicted.  That said, we have seen some spectacular Canadian employment data over the past two years even though it has been a little more volatile lately.  On the data front, the Canadian Manufacturing Sales MoM release is Wednesday morning along with BoC Governing Council Member Schembri speaking at noon, followed by ADP Non-Farm Employment Change and Foreign Securities Purchases on Thursday, and then capped off by the key CPI MoM and Retail Sales MoM on Friday morning.

EUR
The Euro rose to a 10-day peak in its pairing with the Buck this morning as it managed to capitalize on Thursday’s worse than expected US CPI data.  European Central Bank (ECB) President Mario Draghi’s speech on Friday morning was directed at suggesting EU policy to make the single currency more stable, not really focusing on monetary policy as such.  Mr. Draghi is scheduled to speak again on Wednesday morning with market participants looking for any clues into future ECB policy moves.  German Preliminary GDP QoQ, Eurozone Flash GDP QoQ, along with both the German and EU ZEW Economic Sentiment Surveys are scheduled for tomorrow.  The key EU CPI release is on tap Wednesday, followed by German PPI MoM, EU Trade Balance and Current Account data on Friday morning. 

GBP
The British Pound was largely sideways with the Buck after making some gains due to Thursday’s worse than anticipated US CPI release.  That said, the Pound has fallen significantly in recent weeks as the expectations of a Bank of England (BoE) May rate hike faded on recent soft UK economic data, but actually leveled off after the BoE reminded markets they could still raise rates before year end.  That said, this is still a significant downgrade from the more hawkish approach previously expected.  In addition, Brexit headlines continue to put pressure on Sterling as Prime Minister Theresa May has a deadline at the end of June to make an agreement with the EU regarding the UK’s position on the customs union and Irish border issues, while she faces political pressure from hardcore Brexiteers in her part on one side and the majority of parliament on the other.  This is an extremely difficult position for the current UK government and all eyes are watching as the situation unfolds.  In a relatively light data week, the always key UK Average Earnings Index 3m/y, Claimant Count Change, and Unemployment Rate is scheduled for tomorrow with only CB Leading Index MoM rounding out the whole week.

RoW
The Aussie Dollar is largely sideways versus the Buck this morning after rising to an 11-day high on Friday from an 11-month low on Wednesday on disappointing US CPI as oil and gold prices remained firmer.   The Kiwi also rebounded from a five month low on Thursday, on the dovish hold form the RBNZ, against the softer Greenback as well.   The RBA Monetary Policy Meeting Minutes are scheduled for this evening, NZ GDT Price Index and Australian Wage Price Index QoQ tomorrow, and then  Australian Employment Change and New Zealand Annual Budget Release on Wednesday

The Yen was largely sideways versus the Buck overnight with much of the market.   Japanese PPI YoY was on target at 2.0% but Preliminary Machine Tool Orders YoY was worse than last month at 22.0% compared to 28.1% previous.  Preliminary GDP QoQ is on tap for tomorrow night, Core Machinery orders MoM for Wednesday, and then National Core CPI YoY for Thursday night.

The Swiss Franc followed the single currency to a 10-day peak against the Buck overnight.  That said USDCHF is coming off a one-year low from early last week, and remains elevated.  Swiss PPI MoM is scheduled for tomorrow morning with Swiss National Bank (SNB) Chairman Thomas Jordan set to speak on Wednesday afternoon.

USD

The US Dollar is trading a bit lower against Euro, fell significantly to a fresh nearly 7-month (October 3 2016) low against a surging British Pound which was supported by likely conservative dominance in Parliament after the June election.  The Greenback increased versus the Yen, and was largely sideways in its pairing with generally weaker Commodity Currencies. The Japanese Yen weakness is due to the Bank of Japan (BoJ) cutting their inflation forecast overnight, and the high likelihood of the Japanese economy falling further behind its peers.

Treasury Secretary Steven Mnuchin had the market buying US Dollars with his announcement of a 15% tax rate for small businesses, but the broad strokes that we later received from President Donald Trump were disappointing to the market and the Buck has been relatively soft afterwards. Despite the lack of detail, many analysts are suggesting that his plans will struggle to get through Congress as there is still no solidified agreement regarding the debt ceiling, and this this is leading to some negative US Dollar sentiment.  As we approach President Trump’s 100 days as President, his administration is working against the clock to keep the Government from shutting down this Friday as it looks for a deal to extend the budget ceiling. The US Durable Goods data this morning is likely to take a back seat to the US government budget ceiling negotiations.

CAD

The Loonie hit a fresh 14-month low yesterday in the aftermath of worse than expected headline Canadian Retail Sales yesterday at -0.6% compared to 0.0% expected, with a small upward revision to the previous number to +2.3% from +2.2%.  The Core Retail Sales figure was slightly better than expected at -0.1% compared to -0.2% expected, with an increase in the previous Core figure to +2.3% from +1.7%.  With the headline Retail Sales number significantly lower than anticipated, after the disappointing CPI figure Friday, slumping oil and metals prices putting pressure on the Commodity Currencies in general, and, finally, President Donald Trump’s tariff on Canadian lumber the Loonie is firmly on its back foot.  This recent data gives the Bank of Canada (BoC) firm reason to push back toward their dovish stance, and the Canadian economy is typically better off with elevated USDCAD levels.

Yesterday’s sharp move weaker for CAD was also partially driven by a New York Times article saying that the US would withdraw from NAFTA, which was later denied, before it was announced by Canadian PM Trudeau that NAFTA would be updated by renegotiations. This helped the CAD recover from its weakest levels, but USDCAD remains significantly elevated. 

EUR

The Euro is a touch higher in its pairing with the US Dollar this morning, but lower in its pairing with the buoyant Pound, this morning.  The European Central Bank (ECB) left its key Minimum Bid Rate at 0.0% as expected, with the ECB post-meeting press conference set for 8:30 am ET as the real ‘main event’ of this meeting.  The German economic minister announced that they had lifted their growth forecast for 2017 to +1.5% from +1.4%, but yesterday’s pronouncement from US Treasury Secretary Steve Mnuchin initially encouraged Euro selling, as he said that US corporate tax rate would be cut to 15% which would be expected to significantly stimulate the US economy and investment. On the other hand, both Eurozone business and consumer sentiment have improved alongside manufacturing.  With Emmanuel Macron as the leading candidate for French President, the Euro is starting to look more appealing. All eyes on ECB President Mario Draghi’s post-meeting press conference at 8:30am, with traders carefully watching his language.

GBP

Sterling is trading broadly higher across the board, with Cable touching a fresh peak since October 2016, as the Conservative Party is a heavy favorite to assume a large majority in the wake of the June snap election which is seen as positive for UK Brexit negotiations.  The Pound rally really started as a result of financial markets seeing President Donald Trump as under-delivering.  Reuters reported that the Conservative party hold a 22-point lead in a poll conducted by Panelbase. Prime Minister Theresa May’s party is on 49%,  with labor on 27% and UKIP on 5%. The Liberal Democrats have ruled out an alliance with the Labor party.  UK Brexit Minister Davis commented that he favored an intelligent approach to regulation in the years ahead whilst avoiding unnecessary burdens, and ensuring new access to markets. 

USD

The US Dollar is trading a bit stronger against Euro than yesterday afternoon, largely sideways against the British Pound, but higher versus the Yen.  The Buck is higher versus the Loonie and the rest of the Commodity Group.  President Donald Trump has promised that he will give an update on the biggest tax cuts "ever" which he is seeking to implement. In all probability, it may well be a broad outline that we receive but the market has been happy to price this in positively with US yields, and global equities, pushing higher the last few days. While President Trump is set to announce these tax cuts, the administration needs to work with Congress to balance the budget as the fast approaching debt deadline could see a government shutdown as early as Friday if a deal is not agreed.  A government shutdown is certainly negative for the Buck, and may cause market participants to further question the effectiveness of the Trump administration.   

Not surprisingly, the uptick in US Treasury yields helped pushed USDJPY to the highest level since April 9 overnight, but the Yen rate has since followed Treasury yields a touch lower this morning.  That said, the Yen has certainly been sold significantly, after hitting multi-month highs last week, on an uptick in risk appetite after the first round of the French election and as tension around North Korea has relieved a bit (or at least has been less focused on).  The Commodity Currencies are broadly weaker on slumping oil and metals prices, and the Loonie fell to the lowest level in 14-months as a result of added pressure by President Trump's announcement of tariffs on Canadian lumber exports. 

CAD

The Loonie is trading largely sideways after yesterday’s sharp fall to the lowest level since February 2016 as a result of slumping oil prices, Friday’s headline Canadian CPI miss, and aggravated further by President Donald Trump’s announcement of tariffs on Canadian lumber. These factors could also potentially make a case to support Bank of Canada (BoC) Governor Stephen Poloz’s stress of uncertainty.  Furthermore, traders will be watching Canadian Retail Sales is set for release at 8:30am today, as headline Canadian CPI missed on Friday and Wholesale Sales were also lower than expected Monday.  While the BoC seemed to move from an explicitly dovish stance to a neutral one, negative factors could push then back toward a more dovish bent and certainly make any near term BoC rate increase even less likely. 

EUR

The Euro retraced a bit overnight, but remains significantly elevated in the wake of the favorable first round of the French Presidential election.  Indeed, yesterday's Euro rally was fueled further after Goldman Sachs (GS) said that the chances of Marine Le Pen becoming President, or of the Eurozone breaking up, are close to zero.  Furthermore, the leading investment bank stated that they feel that the Euro will be pushing up significantly against the US Dollar in the near future.  A European Central Bank (ECB) source added that as Emmanuel Macron was in the final French Presidential round, the ECB’s fears have eased and this may mean that they will tweak policy language in June.  With a Macron Presidency being priced in the Euro is enjoying a significant relief rally.  HSBC research put this down to the removal of existential risk combined with bullish US Dollar sentiment already being priced in.  That said, all eyes will be firmly on the ECB monetary policy meeting tomorrow, and ECB President Mario Draghi’s post-meeting press conference in particular. 

GBP

Since the initial jump up in Sterling after UK Prime Minister Theresa May’s surprise election call for June 8, the pound has been trading in a tight, but elevated, range in its pairing with the US Dollar over the last few sessions.  While Cable has been elevated, and largely sideways, GBPEUR has been more active as the market now prices in more stability for the Eurozone after the French election results.  Although the public accounts improved yesterday, a move which was attributed to the effects of a lower exchange rate the market does not have the impetus or reason to move out of recent ranges. This range-based trading on Cable could continue for some time in the absence of further news about Brexit negotiations between the UK And European Union (EU), and ahead of the June UK election.

USD

The Us dollar is up as President Trump told the market to expect the biggest "ever" tax cuts this week. They are due to be announced tomorrow (Wednesday) and as the market probably has a different idea of biggest "ever " tax cuts to the President there is room for disappointment and possible US Dollar weakness to follow. As President Trump approaches his 100th day in Government his approval rating is -14 (The Times) which has probably come about as voters see a lack of progress on Obamacare changes, tax and infrastructure spending. If this continues he could get his wish for a lower US Dollar.

CAD

The Canadian Dollar is trading near the lowest level since February 2016, as oil and metal prices have pushed the entire Commodity Currency group lower, and as a result of Friday’s miss on headline Canadian CPI MoM coupled with yesterday’s lower than expected Wholesale Sales MoM.  Canadian Retail Sales is set for release at 8:30 AM tomorrow, and a miss could further underpin dovish Bank of Canada (BoC) Governor Stephen Poloz on his “uncertain” stance over the Canadian economy.   The BoC has recently moved from dovish to neutral, but has a dovish bent as a high USDCAD rate is good for Canadian exports to the US.  That said, the last two releases do not over-ride the last several months of solid Canadian data.  However, weakness in oil and metal prices is taking a fundamental toll on the Loonie as a Commodity Currency.

Euro

Jumped nicely higher across the board, especially EURJPY which gained over 3.5% as the market heaved a sigh of relief that it wasn't given a Melenchon/Le Pen result. The polls were quite accurate this time and now predict a Macron win 60/40 over Le Pen. However, the positive sentiment around the Euro has been dampened a little as the market now looks to how much change Macron can actually deliver as the new President will have to face the national elections in June and doesn’t have a political party behind him.

GBP

Tried to follow EURUSD higher after the French election result but encountered GBPEUR sales which saw a gap lower to 1.1750 and knocked GBPUSD back. A CBI comment rang true as they said that the weak pound was helping exporters whilst Brexit was weighing upon UK investment. PSNB actually decreased by £20 billion to the financial year ending March 2017 and has helped sterling this morning

USD

The US dollar is trading generally lower, except in its pairing with the Yen,  with the Euro leading the way higher due to Emmanuel Macron taking the lead against Marine Le Pen in the first round of the French election.  Indeed, the single currency hit a 5-month peak versus the US dollar In the overnight session, and both the Swiss Franc and the and the Commodity Currencies all ticked higher versus the Greenback.  The US Dollar did increase to a two-week peak in its pairing with the Yen as the increased chances of a Macron victory bolstered global investor risk appetite. An uptick in oil prices helped push the Loonie and other Commodity Currencies versus the Buck.  While the US Dollar was a bit higher against the Pound, Sterling did manage to hold on to most of last week’s gains.

The main data domestic point this week is Advanced GDP QoQ set for release on Friday, and many analysts have trimmed expectations in the wake of recent misses on US CPI, employment and Retail sales data.   Minnesota Federal Reserve President Neel Kashkari is scheduled to speak today. HPI MoM and the Richmond Manufacturing Index tomorrow, and Durable Goods Orders on Thursday. 

It is also worth noting that President Donald Trump is supposed to sign several executive orders this week making it easier for the US to develop energy offshore along with further announcements on Tax Reforms.  The Market will continue watching news from the Trump administration to gauge its effectiveness.  

CAD

The Canadian Dollar, assisted by oil prices, is trading higher versus the broadly sold US Dollar this morning.  While Friday’s CPI data was worse than expected, it does not over-ride the swath of recent better than expected Canadian data, although it does assist dovish Bank of Canada (BoC) Governor Stephen Poloz’s argument of uncertainty.  Wholesale Sales MoM was also worse than expected today at -0.2% compared to +2.1% expected, and a downward revision to the last release to 3.0% from 3.3%.  Canadian Retail Sales is scheduled for Wednesday morning, with the key GDP MoM data, along with IPPI MoM and RMPI Mom, set for Friday morning as well.  As always, oil prices and risk appetite will also continue to influence the Loonie.

EUR
EURUSD jumped to a 5-month peak, as the Euro was broadly stronger in the overnight session, after Centrist French Presidential Candidate Emmanuel Macron took the lead in the first round of the French elections.  Macron will face far-right candidate Marine Le Pen in the final round of voting on May 7. The single currency was up around 1.5% on the news against the USD, and many analysts have viewed that the second round will be much more comfortable for Macron due to further endorsement from candidates  Fillon and Hamon.  Clearly, a Marine Le Pen loss in the election is likely to bring significant relief to the single currency.  In addition, on the data front, the better than expected German Ifo Business Climate Survey helped underpin the single currency as well.

The European Central Bank (ECB) monetary policy decision and ECB President Mario Drahi’s post-meeting press conference this Thursday will take center stage on the Eurozone economic data calendar this week.  Traders expect no changes to either the key ECB Minimum Bid Rate, or the ECB economic outlook.  Spain, France, Italy and Germany will produce their own CPI reports throughout the week.

GBP
The British Pound is trading bit lower this morning versus the Buck, but has held on to most of last week’s significant gains.  Worse than expected CBI Industrial Order Expectations this morning helped undermine Sterling a bit, along with yesterday’s lower than previous Rightmove HPI release.  That said, all eyes are on Friday’s Prelim UK CPI data on the UK economic front.  However, with the general election in 6 weeks’ time, politics is likely to take center stage, as well as any news regarding Brexit negotiations  between the European Union (EU) and UK.

USD

The US Dollar is mixed this morning as the 10-year Treasury yield helped the Buck rebound a bit in its pairing with the Yen, but both the Euro and Swiss franc ticked up to a 22-day peak versus the greenback overnight.  The Greenback gave back some of yesterday’s gains versus the broadly higher British Pound but continues trading stronger against the Loonie on weaker oil prices.  The US Dollar was a bit lower in its pairing with Aussie after on target NAB Quarterly Business Confidence data but increased significantly versus the Peso which had been on a rally the last week.  Political uncertainty continues to weigh on the dollar, as traders question the effectiveness of the Trump administration and the tense situation in North Korea presents some significant geopolitical risk in Asia.  That said, the US Dollar remains supported by fundamentals as US interest rates are poised to rise.  Federal Reserve Vice Chair Stanley Fischer confirmed that Fed rate hikes would be gradual and continued that he expected overseas economies to be able to "manage" this normalization.

Market participants will be eyeing Philly Fed Manufacturing index this morning, after the dismal reading of Empire State Manufacturing Index data on Monday. However, the main even today for the US is likely to be the speech by US Treasury Secretary Steven Mnuchin at 01:15 PM ET for clues into President Donald Trump’s economic policy.  The administration has been pushing for a weaker Greenback lately, and traders will be eyeing this speech carefully.

CAD

The Loonie continues to trade weaker as WTI Crude has fallen 5% from this week’s high.  Further, market participants will be watching tomorrow’s key Canadian CPI data. While Canadian economic data has been extremely strong recently, the Bank of Canada (BoC) has merely moved from dovish to neutral.  While this is  a positive shift, it is important to remember that US Treasury yields and Fed interest rates are on their way up.  It will be interesting to see if continued positive data will push the BoC toward a potentially hawkish bent.

EUR

The single currency brushed off worse than expected German PPI data this morning, and traded up to a fresh 22-day peak versus the Buck.   Many traders feeling that it is benefiting from technical gains through Sterling, along with yesterday’s positive Eurozone economic data.  The Euro was supported yesterday by on target CPI combined with better than expected Trade Balance data, but did fall versus the Greenback during the US session.  That said, the single currency pushed higher “through the cross” as Sterling has gained significantly overall on the week.  European Central Bank (ECB) board members Coeure and Praet helped weaken the Euro during yesterday’s US session as they both explained that it was too early to change the ECB’s Quantitative Easing (QE) given policy long term risks still "tilted to the downside.” 

The pivotal French Presidential Election polling is extremely tight with the latest Le Monde poll seeing Marine Le Pen and Emmanuel Macron still just in the lead.  In broad terms a Macron/Fillon result will be positive for the Euro, and a Le Pen/Melenchon as a negative.  A combination of these results, probably being Macron and one other will likely see the market expect a Macron victory overall, and probably give the Euro support.   However, a low turnout will boost concerns over a Le Pen win and could encourage Euro weakness in the near future. 

Eurozone Consumer Confidence is set of 10:00am this morning, but the French elections remain the most important data point for the Eurozone in the near future.

GBP

GBP/USD was a bit lower yesterday, but has managed to stay well within striking distance of the 6.5-month high it hit on Tuesday on the prospect of the snap UK election on June 8.   Prime Minister Theresa May is calling an early election to avoid further clashes on Brexit, as it seems her Conservative Party may be poised to strengthen its position. Some analysts also consider that if the polls are to be believed, and the Tories are re-elected with the biggest majority since 1983,  then it gives UK PM May the opportunity to side line the MP's lobbying for a "hard Brexit," and actually agree terms which do not see the UK resorting to WTO rules.  The new timeline with the next election after this one due in 2022 will also give the Government four years instead of two to agree Brexit details and a transition deal.  This points to a potentially softer, more choreographed, path for the UK economy rather than the previously considered harsh, rushed negotiations which is positive for the UK and Sterling.  Traders will be eyeing Bank of England (BoE) Governor Mark Carney’s speech today.  A Reuters poll saw the BoE keeping monetary policy the same as now until 2019, and giving a 30% chance of the UK leaving the European Union (EU) on WTO rules.  In addition, we have UK Retail Sales on tap for tomorrow morning.

USD

The US Dollar traded up to a two-week high against the Loonie, and was higher against the other Commodity Currencies this morning as oil prices remained relatively low despite ticking up a bit this morning.  While the Yen did fall overnight, USDJPY remains close to the five-month low achieved on Monday.  Overall, political uncertainty is weighing on the Commodity Group, while underpinning the Yen, as the tense situation in North Korea remains a significant issue.

Furthermore, questions around the effectiveness of the Trump administration continue to weigh on the US Dollar in its pairing with the Euro, Sterling, and Swissy.  This is in line with the notion that there is a perceived political cap to the US Dollar, despite firm expectations of rising US interest rates on the fundamental side.  In a relatively light day for US Data, Crude Oil Inventories is on tap this morning with the Federal Reserve’s Beige Book set for release this afternoon.

CAD

The Canadian Dollar was sold to a three-week low as oil prices remain relatively subdued despite a small uptick overnight.  In addition, market risk aversion is weighing on the Commodity Currencies in general.  Market participants will be eyeing Bank of Canada (BoC) Governing Council Member Carolyn A Wilkins speech this afternoon.  While the BoC shifted from a dovish stance to a neutral one last week, which is supportive of the Loonie, the BoC did stress that there could be future uncertainty for the Canadian economy. Any clues into future BoC policy will be watched carefully.  All eyes are on Canadian CPI set for release this Friday coupled with day-to-day fluctuations on oil prices.

EUR

The Euro hit a 3-week peak yesterday in its pairing with the Buck, as the US Dollar was sold versus Euro, Sterling, and Swiss Franc yesterday and overnight.  The Euro was underpinned by on-target CPI data this morning combined with a better than expected Eurozone Trade Balance figure.  Eurozone CPI came in at +1.5% which was exactly as expected/previous, and the Core CPI figure followed suit with an on-target 0.7% number.  Trade Balance was better than expected at 19.2B compared to 18.6B, and much better than the 15.7B last month.   While the single currency is stronger this morning, the French Presidential Election continues to loom large. With anti-European Union (EU) Candidate Marine Le Pen still firmly in the race, there is significant event risk in the election which could have major influence on the unified currency in the near future.  Indeed, the upcoming Brexit negotiations between the EU and UK will also be watched.  German PPI MoM is set for release tomorrow overnight, and Eurozone Services and Manufacturing PMI are scheduled for Friday morning.

GBP

The British Pound is broadly higher, and GBP/USD hit a 6.5-month peak yesterday.  It is very likely that a short squeeze, on the technical side, has helped push the Pound higher, as GBP shorts are at an all-time high and it seems many were stopped out on this recent rally.  In addition to this, from a fundamental perspective, the UK economy has performed quite well in the face of Brexit.  Indeed, the IMF has increased global forecasts for GDP from 3.1% to 3.5% and the UK forecasts improved to 2% from 1.5% which helped bolster Sterling as well. 

Conservative UK Prime Minister Theresa May called a snap general election for June 8, despite dismissing she would call an early vote in the past.  UK PM May made it clear she felt the UK needed a strong, unified, government going into Brexit negotiations with the EU in the near term, and other parties were trying to “grind the business of government to a standstill.”  On a cynical level, UK polls show a 20+ point Tory Party lead against Labor, and this could lead to the most dominant Tory majority since 1983.  This seems to be a play for stronger Tory control on Brexit negotiations.

USD
The US Dollar is trading mixed this morning, but generally on its back foot as a result of Friday’s lower than anticipated data coupled with domestic political uncertainty. Friday's miss on US Retail Sales and CPI continue to weigh on the US Dollar in its pairing with the Euro, Sterling, Swiss, and Yen.  Further, the tense situation in North Korea has weighed on the Buck. 

The Euro traded to a 19-day high versus the Greenback, while Cable touched a 4-month peak, and the Swiss Franc traded to a three-week high against the Buck overnight.  The Greenback ticked up just a bit against Yen, which weakened a little  from the fresh five-month high it achieved versus the Greenback yesterday.  The Yen fell a bit across the board as yesterday's comments from Bank of Japan (BoJ) Governor Kuroda reminded traders that it is unlikely for the BoJ to exit de-facto negative interest rates in the foreseeable future.  That said, the Japanese currency is broadly stronger on the last few weeks as a result of a sharp increase in risk aversion which has been accentuated by the tense situation developing in North Korea.  The US Dollar actually ticked up in its pairing with the Commodity Currencies, including the Loonie, largely on weaker oil prices and the same risk aversion. 

The market will also anticipate any advancements in Healthcare or Tax reform talks coming out of Washington.

CAD

The Canadian Dollar was broadly weaker as oil prices softened, and geopolitical uncertainty is weighing on the Commodity Currencies in general as it may negatively affect trade.  That said, the Loonie did gain significant support from last week’s Bank of Canada (BoC) meeting as the Canadian central bank shifted to a more neutral stance on recent strong Canadian economic data.   It is clear that the potential rate hike that the BoC mentioned in January is unlikely.  All eyes are on Canadian CPI set for release this Friday.

EUR
The Euro traded up to a 19-day peak in its pairing with the Buck, but lower versus the Pound, as the French Presidential Election continues to loom large.  With no clear winner in sight, and over a third of the electorate undecided, traders have predicted significant possible volatility in line with the outcome. On the data front, we have a relatively quiet week for the Eurozone with CPI on Wednesday. This is always a key inflationary indicator, and will be watched to gauge growth in the Eurozone.

GBP
Sterling is broadly higher, and traded to a 4-month peak in its pairing with the US Dollar this morning.   There is no significant data on tap for the UK until Retail Sales on Friday, but any developments on Brexit will be watched carefully.  The UK economy has been resilient in the face of Brexit up to now, and this is reflected by the recent uptick in the British Pound in the absence of any new information about negotiations between the UK and European Union (EU) of late.  Political news out of France and North Korea may also affect Sterling in the near term.

USD
The US Dollar is trading mixed this morning, as relatively light US data yesterday and this morning is leaving the Greenback open to factors elsewhere.  The Federal Budget Balance is set for release this afternoon at 2pm ET today, and US PPI data, a key inflationary release, is set for release tomorrow morning.  The Buck is trading weaker in its pairing with the broadly stronger Yen as a result of risk aversion, falling US Treasury yields, and better than expected Japanese Bank Lending and nearly on target PPI.  The Greenback is a touch stronger versus Euro and Swissy since yesterday morning as the French election is weighing on the Eurozone as a whole. However, the US Dollar fell against a generally stronger British Pound, which has strengthened on an increase in the UK Average Hourly Earnings Index this morning.  The Greenback sideways in its pairing with the Loonie, despite higher oil prices, ahead of the Bank of Canada (BoC) monetary policy announcement this morning at 10am ET.  Any headline from Washington on Tax and/or Healthcare reforms will also continue to have an impact. 
 
CAD
The Canadian Dollar is sideways in versus the US Dollar ahead of the BoC monetary policy decision at 10am ET.  While no change is expected in interest rates, traders will be eyeing the BoC Rate Statement, post meeting press conference, and BoC Governor Stephen Poloz’s speech this afternoon to see if recent strong Canadian economic data will sway the BoC to shift from an explicitly dovish stance to a neutral one.  BoC Governor Poloz has consistently stressed uncertainty for the Canadian economy, and “talked down” the Canadian Dollar at most opportunities.  The Commodity Currencies are generally lower, but the Loonie is underpinned by stronger oil prices overnight.  All eyes on the BoC at the moment, with Canadian Manufacturing Sales set for release tomorrow.  
 
EUR
The Euro is a bit weaker in its pairing with the US Dollar this morning in range-bound trading, as concerns over the French election continue to weigh on the single currency.  Yesterday, the key German ZEW Economic Sentiment Survey was better than expected.  This morning the German WPI MoM was worse than expected at 0.0% compared to +0.4% expected, and +0.5% previous.  That said, the larger issue at the moment is the French election.  The emergence of Socialist Candidate Jean Luc Melenchon in the French Presidential race threatens to split some support from Emmanuel Macron which could actually bolster anti-European Union (EU) Candidate Marine Le Pen.   With no major data being released before the Easter Holiday starting on Friday, traders are likely to look to headlines from France for guidance in the short term.

GBP
The Pound is trading higher versus the US Dollar, Euro, and Swiss Franc as a result of relatively good UK inflation data. UK CPI and PPI were both higher than expected yesterday, and while many analysts point to the sharp weakening in Sterling as the cause, this does still imply growth in the UK economy.  Today, the UK Average Hourly Earnings Index came in at +2.3%, compared to the +2.1% consensus,  with an upward revision to +2.3% from +2.2% from the last figure.  This shows that incomes are growing, and is another favorable inflationary data point.  The UK Claimant Count Change was worse than expected at 25.5K compared to -10.2K expected, and a downward revision to the last release to -6.1K from -11.3K.   The lower this number is, the better, as it measures the number of people in the UK claiming unemployment benefits for March.  The UK Unemployment Rate stayed stable at 4.7% as well.  This mixed UK employment data is the last major release before the 4-day Easter weekend there.  Market participants bought the British Pound on the data, and seem to be waiting for further information regarding Brexit negotiations between the UK and EU to break recent ranges on GBPUSD and EURGBP.  

RoW
The Commodity Currencies are trading lower, despite an uptick in oil prices, on risk aversion, recently falling iron ore prices, and fears about global trade and Chinese demand in the near future.  In addition, the Australian and New Zealand Dollars weakened on a -0.7% reading of Westpac Consumer Sentiment last night, versus +0.1% previous, and a day after NAB Business Confidence was also slightly worse than the last release as well.   The Mexican Peso and Rand followed suit and wakened as well.
 
The Japanese Yen traded broadly higher on falling US Treasury yields, market risk aversion, and relatively good Japanese data.  Japanese PPI was released essentially on target at 1.4% compared to the 1.5% consensus, and an upward revision to the last figure to 1.1% from 1.0% previously.   Japanese Bank lending came in at +3.0% compare to the +2.9% expected, and also better than the previous +2.8% number.  While Japanese Core Machinery Orders were worse than expected, on balance, the data was taken positively by traders.
 
The Chinese Yuan fell significantly, as Chinese CPI was worse than expected at 0.9% compared to the 1.1% consensus, although it was higher than the +0.8% previous figure.  This fueled fears about decreasing Chinese demand to an extent.  On a positive note, Chinese PPI did come in at 7.6% compared to the 7.4% figure anticipated, but lower than the 7.8% number last month.

USD
The US Dollar is broadly higher this morning, except versus the British Pound and Canadian Dollar, as the US employment report ultimately had a positive effect despite the significant miss on the headline US Non Farm Employment Change. Non-Farm Payrolls number came in at +98K which was well below the market consensus of +174k,  but US Average Hourly Earnings were on target at 0.2% with an upward revision to last month’s figure to +0.3% from +0.2%.  In addition, the US Unemployment Rate dropped to a 10-year low at 4.5% from the expected and previous 4.7% figure.  The US air strike on Syria, which brings increased geopolitical uncertainty into the picture, also saw broad purchases of US Treasury Bonds as market participants often flood into US Government debt, and US Dollars, in times of uncertainty.  President Donald Trump did say that himself and Chinese Premier Xi Jinping were making “tremendous progress” during their meeting last week. 

On balance, all of these factors  helped push the US Dollar to a one-month peak in its respective pairings with the Euro and Swissy, one-week high against the Japanese Yen,  86-day peak (Jan 16th) in its pairing with the Aussie, and 27-day high versus the Kiwi overnight.  The Canadian Dollar traded to a one-week high versus the Buck as oil prices soared, and Canadian Employment Change was better than expected Friday.  In addition, the British Pound traded up overnight after falling to a 17-day low in its pairing with the Greenback on Friday.  

Federal Reserve Chair Janet Yellen speaks this afternoon, and the market will look for confirmation of NY Federal Reserve President William C/ Dudley’s hawkish remarks last Friday. The US Federal Budget Balance is set for release Wednesday, PPI data is on tap Thursday, and US CPI coupled with Retail Sales data is scheduled for Friday morning.

CAD

The Canadian Dollar is trading close to a one-week high versus the Greenback as oil prices have soared higher coupled with yet another better than expected Canadian Employment Change released on Friday.  On the data front, Canadian Employment Change was in at +19.4K compared to the+5.7K expected, and the previous +15.3K figure.  This figure has been consistently above expectation since September.  The Canadian Unemployment Rate did increase 0.1% to 67%, but unemployment is a notoriously lagging indicator.  On balance, Canadian employment data has been doing fantastic recently.  Ivey PMI was also better than expected at 61 compared to the 56.3 consensus.  Oil prices are also supporting the Loonie as they have soared in the wake of the US airstrike on Syria given the potential geopolitical risk in the Middle East. 

All eyes are on the Bank of Canada (BoC) monetary policy decision set for release on Wednesday morning.  While no change to interest rates is expected from the BoC, market participants will be carefully watching the BoC post-meeting press conference to see the recent spate of positive Canadian data will potentially push the BoC away from its explicitly dovish stance.  This seems to be unlikely as BoC Governor Stephen Poloz has stressed uncertainty, and talked down the Canadian Dollar at most opportunities, but one assumes the BoC can only ignore such positive data for so long. 

Euro
The single currency has fallen to a fresh one-month low in its pairing with the Greenback overnight on last Friday’s US Employment Report coupled with the market shifting away from any expectation of a near-term European Central Bank (ECB) rate hike.  ECB President Mario Draghi was clear that nothing had changed enough to change the EC’s very accommodative monetary policy.  Indeed, he was still critical of growth, and attributed much of it to the current Quantitative Easing (QE) steps.  The French Presidential election also appears to be weighing on the single currency, with the late emergence of Melenchon, a left-wing candidate, threatening to split the vote.  This could be favorable for anti-European Union (EU) Candidate Marine Le Pen.  The Sunday Times reported at the weekend that some 40% of the public are undecided on who to vote for, and the potential for a Le Pen victory is a real risk for the single currency.  This week sees ZEW Economic Sentiment tomorrow, and German CPI on Thursday.

GBP
Sterling recovered from Friday’s 17-day low versus the Greenback overnight, as market participants seem to be waiting for further news from Brexit negotiations before taking any significant direction on the Pound.  Last week was noteworthy in the fact that excellent PMI data (services were 55.0 and above expectations of 53.5) did not produce a noteworthy rally in GBPUSD.   However, the weaker data at the end of the week in the form of manufacturing production (a MoM drop of -0.1% and a worsening goods trade balance of -£12.5bio) did see GBPUSD weaken.  Also of importance, UK Prime Minister  Theresa May was told by the EU that her three requests for the negotiating process were to be denied.  The UK must leave the EU (or be substantially down the line to agreement on departure terms) before anything is agreed, and the sum the EU calculates as an exit fee is still Euro 60 billion.  The Prime Minister’s response has been to confirm that migration will continue in its present state until 2019, when the UK actually leaves the EU. So, the UK may well have a hard time at the negotiating table but remember that Parliament is full of MP's who want a soft Brexit and of course PM May was a "remainer" herself. This week's data includes BRC retail sales data today, UK CPI tomorrow, and the Average Earnings Index on Wednesday.

RoW
Both the Australian and New Zealand Dollars traded broadly lower from worries over global growth, weakening iron ore prices, and concern regarding how the meeting between President Trump and Premier Xi would go.  So far so good as the meeting appeared to have no major negative headlines attached to it.  Indeed, President Donald Trump did note “tremendous progress” on Friday.  However, there is still uncertainty around any concrete results from this meeting, and there is concern over both Chinese, and global, demand. The Australian Dollar fell close to a three-month low in its pairing with the Greenback, and the Kiwi dropped to a four-week trough versus the Buck.  Australian NAB Business Confidence is set for release this evening, with New Zealand PPI and Australian Employment change on tap for late Wednesday

The Japanese Yen is trading at a one-week low as US Treasury Bond Yields ticked up, in addition to market purchases of US Dollars amid Friday’s US Employment Report.  Further, Bank of Japan (BoJ) Governor Kuroda’s comments that inflation was stuck around zero, and the BoJ would continue its massive support for the Japanese economy, also undermined the Yen.  The Yen has recently been purchased on risk aversion, but the Japanese economy has continued to demonstrate little growth recently.   Japanese PPI is due tomorrow, and Revised Industrial Production is in tap for Friday.

The Swiss Franc traded to a one-month trough in its pairing with the US Dollar, as it followed the Euro down and the US 10-year Treasury yield ticked up.   Swiss PPI is set for release on Thursday.

USD
The Buck is trading higher against most of its rivals, except the Yen and Loonie, ahead of this morning’s US Employment Report at 8:30am ET.  The US Dollar hit a 28-day high in its respective pairings with Euro, Kiwi, and Swiss Franc, while reaching a near one-month peak against the Australian Dollar.  The Canadian Dollar traded higher overnight as oil prices soared, and the Yen was a touch stronger as the US 10-year Treasury yield fell just a bit.  The price of oil soared on geopolitical risk in the Middle East largely as a result of the US airstrike on Syria overnight.  President Donald Trump authorized this attack as Syria used chemical weapons on its own people.  While Mr. Trump previously advocated staying out of this conflict, he was outraged about the Syrian government’s Sarin gas attack on its own civilians.  Market participants are focused on the US Non-Farm Payroll figure today, in addition to any news about the summit between Us President Trump and Chinese Premier Xi.  The latter issue will cover a myriad of issues including North Korea, international trade, as well as being a foreshadowing of US-China relations under the Trump administration. 

CAD

The Canadian Dollar soared along with oil prices in the wake of the United States missile attack on Syria last night.  In addition, the Canadian Employment Change number is being released simultaneously with the US Employment Report this morning, with the key Ivey PMI to follow later in the morning.  Canadian employment data has been consistently strong since September of last year, and continued positive data could potentially persuade the Bank of Canada (BoC) to shirt toward a neutral, versus the current dovish, stance in the near future.  That said, BoC Governor Stephen Poloz has been consistently dovish, stressing uncertainty for the Canadian economy, and has seemed to “talk down” the Loonie at every opportunity.

EUR
The Euro has fallen to a 28-day trough in its pairing with the Greenback on political uncertainty in France coupled with more dovish talk from European Central Bank (ECB) President Mario Draghi.  A recent poll has suggested that the Euro could fall to a five-year low against its peers if anti-European Union (EU) Candidate Marine Le Pen wins the French Presidential Election.  Further, the bearish tone by ECB President Draghi earlier this week has also weighed on the single currency. Taking a short term perspective into account, the outcome of round two in the presidential election at the end of the month will surely drive the Euro.  Next week is relatively light on data so expect Political releases combine with any ECB speakers to be the main mover.

GBP
Cable traded down as the US Dollar rose overnight, and Sterling fell on a spate of worse than expected UK data.  UK Manufacturing Production was released at -0.1% compared to the +0.3% expected, and a downward revision of the last figure from -0.9% to -1.0% as well. In addition, UK Goods Trade Balance, Halifax HPI MoM, Industrial Production, and Construction Output were all lower than expected this morning.  Bank of England (BoE) Governor Mark Carney stressed the serious potential for financial instability due to Brexit in coming years in his speech this morning.  Mr. Carney noted this depends on the cooperation between the EU and UK.  He stressed the acrimonious  negotiations would be bad for both sides, and the UK in particular.   It seems the fate of the Pound is hanging on Brexit negotiations and the sense of cooperation between the EU and UK amid these crucial talks.
 

USD
The US Dollar is trading largely sideways versus most of its rivals, along with the US 10-year Treasury Bond yield, ahead of tomorrow’s key US Employment Report.  Yesterday’s ADP Non-Farm Employment Change was higher than expected at 263K comparted to the 184K consensus, but there was a downward revision to the previous figure from 298K to 245K. The ADP figure is often, but not always, fairly accurate forecasting of the all-important US Non-Farm Employment Change which is due at 8:30am tomorrow.  Today marks the beginning of the summit between US President Donald Trump and Chinese Premier Xi Jinping which will be carefully watch due to implications on global trade.  President Trump made it clear that he expects this meeting to be “very difficult” given his opinion that China has an advantage in its trade relationship with the US.  That said, a difficult meeting could put US Treasury yields under pressure, as China purchases a significant amount of US government debt on a regular basis.  All eyes on news from this meeting between President Trump and Premier Xi, along with tomorrow’s all-important US Employment Report.

CAD

The Canadian Dollar is a bit softer this morning, despite rising oil prices, but inside of recent ranges.  Canadian employment data  is due simultaneously with the US Employment Report tomorrow morning at 8:30am ET.  Recent Canadian employment data has been very strong, but the Bank of Canada (BoC) has been consistently dovish.  Interestingly, oil has moved up significantly this week, but there is a feeling that  oil prices are stuck in lower ranges at the moment and thus relatively weak.  There is some uncertainty around the renewal of the OPEC production agreement as prices have not risen significantly.  In addition, market participants seems to be somewhat nervous around the Commodity Currencies in general with the summit between President Trump and Chinese Premier Xi set to begin today.  Slowing global trade is negative for commodity prices and the commodity group in general.

Euro
The single currency is largely sideways this morning.   European Central Bank (ECB) President Mario Draghi made it clear this morning that he does not have any intention to raise rates in the near future.  Mr. Draghi specifically said, “We have not yet seen sufficient evidence to materially alter our assessment of the inflation outlook – which remains conditional on a very substantial degree of monetary accommodation.”  This is a strongly dovish statement as it implies that Eurozone inflation is only climbing, albeit not that much, due to the ECB Quantitative Easing (QE) scheme.  German Factory Orders were basically on target at +3.4% compared to the  +3.5% expected, and the previous number was revised up to -6.7% from -7.4%.  Given the release was highly negative last time, this is relatively positive.  Politically, it was good news for Europe that French Presidential Candidate Marine Le Pen was light on the ‘Frexit’ subject yesterday, but the fact that the vocally anti-European Union (EU) Le Pen is one of the front runners in the election implies that there is at least a degree of French discontentment vis-à-vis the Eurozone.  Market participants will continue to be focusing developments in the French election.

GBP
The British Pound sold off a bit versus the Greenback and Euro this morning, but, again, was generally trading sideways and was just a touch weaker.  UK Housing Equity Withdrawal was worse  than anticipated at -10.2B compared top -9.5B expected, and the previous release was revised down to -11.2B from -10.9B.  UK Prime Minister Theresa May is meeting with EU Council President Donald Tusk to discuss the way forward with Brexit.  Interestingly, Ryaniar announced they have to suspend UK flights for “weeks or months” as there is no Brexit aviation deal as of yet.   This reflects the confusion, and the myriad of ways that lack of agreements between the UK and EU can affect the economy. All eyes on Brexit developments along with UK Manufacturing Production and the NIESR GDP estimate tomorrow.

RoW
The Commodity Currencies have been generally subdued this week ahead of the meeting between president Donald Trump and Chinese Premier Xi Jinping, as this could significantly impact global trade.   Indeed, the economies of Australia and New Zealand can be affected significantly by Chinese demand.  In addition, the Reserve Bank of Australia (RBA) meeting this week, with RBA Governor Phillip Lowe warning about a potential Real Estate bubble, has weighed on the antipodeans as well.  Not surprisingly, the South African Rand has weakened given the political situation which has led to South Africa’s government debt being downgraded to junk earlier this week.  

The Mexican Peso has also weakened this week given the US-China summit, as Mexico itself could come back under pressure from President Trump’s rhetoric as well. Not surprisingly, the Chinese Yuan is trading weaker over the past few days as market participants are watching what comes out of the meeting.

The Swiss Franc was a touch lower, but largely sideways, despite on-target Swiss CPI released at 0.2% today.  The Swiss is trading around a three-week low versus the Buck.  Both safe haven Yen and Swiss came under some selling pressure with a rebound in US Treasury yields yesterday.

USD
The US Dollar is trading higher in its respective pairings with the safe-haven Swiss Franc and Japanese Yen this morning, amid an uptick in US Treasury yields, but slightly lower versus both the Euro and British Pound in fairly tight ranges.  In addition, the Canadian Dollar ticked up overnight along with oil prices.  The main theme surrounding the Buck and US Equities this week is concern over the upcoming China-US summit. “The meeting next week with China will be a very difficult one in that we can no longer have massive trade deficits” President Donald Trump tweeted on March 30.  Although the productivity of this meeting will likely impact the Greenback, it’s worth noting the main focus will still be on whether the Trump administration can effectively carry out its policies.  The US Dollar continues to derive strength from the Federal Reserve’s determination to gradually raise interest rates coupled with positive domestic economic data, but financial markets seem to be capping the Buck as they feel out the effectiveness of the new Presidential administration.  There is significant US Data on tap today, including the ADP Non Farm Employment Change and FOMC minutes.  Market participants will be looking at the ADP number to gauge the all-important US Employment Report set for release on Friday.

CAD

The Loonie strengthened overnight along with oil prices, despite yesterday’s worse than expected Canadian Trade Balance data.  Indeed, Brent Crude oil hit a one-month peak largely as a result of an unplanned production outage in the North Sea and wide expectations of a drawdown in US inventories. In addition, traders seem to feel there is a high  likelihood of OPEC renewing their production cut agreement as oil prices have been relatively low and flat recently. That said, the disappointing Canadian Trade Balance figure yesterday seems to have tempered the Loonie’s strength amid the sharp increase in oil prices.  Canadian employment data is set for release Friday morning, simultaneously with US Non-Farm Payrolls, and Canadian Employment Change has been a bright spot for some time now.  However, despite very strong Employment data out of Canada dating back to September, the Bank of Canada (BoC) has not changed its dovish stance. 

EUR
The Euro is trading up a bit in its pairing with the Greenback as a result of political factors and a nearly on target Eurozone Final Services PMI number this morning.  The main mover was political,  as notably  anti-European Union (EU) French Presidential Candidate Marine Le Pen was labelled soft on “Frexit” plans during the live debate yesterday.  It is worth noting that French Polls have revealed 2/3 of voters want to remain in the EU, and retain the Single Currency.  In addition, Eurozone Final Services PMI came in nearly on target at 56 compared to the 56.5 expected and previous figure.  European Central Bank (ECB) President Draghi is scheduled to speak tomorrow afternoon, and German Factory Orders along with Eurozone Retail PMI is set for tomorrow morning.

GBP
The Pound bounced back versus the US Dollar, albeit in tight ranges, this morning after UK Services PMI came in higher than expected.   The number was released at 55 compared to  the 53.5 consensus, and a previous figure of 53.3.  This was welcomed positive news for Sterling after yesterday’s slight miss on UK Construction PMI, and Monday’s worse than expected UK Manufacturing PMI figure.  UK economic data has been relatively sturdy in the face of Brexit, but there is still significant uncertainty.  The Pound has been in generally tight ranges since Prime Minister Theresa May triggered  Brexit last Wednesday as traders wait for developments on EU trade negotiations with the UK.  There are a great deal of unresolved issues, and we could be in for significant volatility in the near future.
 

USD

The US Dollar is trading higher against most of its rivals this morning except the broadly higher Yen.  The Greenback hit a fresh 21-day peak in its pairing with the Euro, fresh 20-day high versus the Swiss Franc, a 25-day peak against the Aussie, a 21-day peak in USDCAD, and a three-month peak in its pairing with the South African Rand.   Rising US interest rate expectations in contrast with many soft economies abroad helped pushed the US Dollar back to its levels against the Euro, Siwssy, and Loonie prior to the sell-off after the FOMC meeting on March 15.  In general, the Commodity Currencies were lower, as a result of softer metal prices, political problems in South Africa, and the Reserve Bank of Australia (RBA) overtly pointing to a potential asset bubble in Australian real estate after leaving their key rate unchanged overnight. The safe-haven Yen was broadly stronger as the US 10-year Treasury Yield fell, and Japanese Trade Balance data was significantly better than expected.  The market is also concerned about this week’s meeting between President Trump and Chinese Premier Xi, which could have a larger impact on global trade.  US Trade Balance date is set for release at 8:30am ET today.

CAD

The Loonie traded lower ahead of today’s Canadian Trade Balance data, and has seemed to succumb to some of the general pressure on the Commodity Currencies right now.  While oil prices are actually higher over the last few days, with Brent Crude maintaining above $53 per barrel at the moment, there is a feeling that the outlook for oil prices is less than bullish.  Despite the OPEC agreement, Oil has been in a narrow band over the last several months.  With recent news of larger US stockpiles than previously suspected, questions about whether the OPEC agreement will be renewed, and some fear about US President Donald Trump impacting global trade in a negative way there is concern oil may be stuck in this band for some time.  In addition, the Bank of Canada (BoC) has been very dovish in the face of some very positive Canadian economic data, and BoC Governor Poloz has made it quite clear he has no intention of raising interest rates. 

GBP

Sterling is trading a bit weaker this morning against the Buck on worse than expected UK Construction PMI this morning coupled with yesterday’s worse than expected UK Manufacturing data.  The Construction PMI figure came in at 52.2 compared to 52.5 expected and previous.  Yesterday, UK manufacturing PMI disappointed the market coming in at 54.2 compared to the consensus of 55.1.  However, ,on the bright side, this still provides an average of 54.75 for the last six months, which is actually fairly positive given the UK economy is facing Brexit.  Sterling seems to be in a very short-term holding pattern as the market seems to be waiting for more information about Brexit negotiations in the wake of Prime Minister Theresa May triggering Article 50 last Wednesday. 

Euro

The single currency is trading lower despite higher than expected Eurozone Retail Sales data, ahead of the televised French Presidential debates today. Eurozone Retail Sales came in at +0.7% compared to the +0.5% market expectation, and an upward revision to the previous number from -0.1% to +0.1%.  However, the French election looms large; while market participants have priced in a lower chance of the anti-European union (EU) Marine Le Pen winning, she is still one of the two front runners.  Merely the widespread support for Le Pen reflects some extent of the French electorate’s discontentment regarding the EU.   

There has been some news about global central banks net selling Euro holding as a result of uncertainty.  It is also reported that unless Hungary and Poland agree to accept their quotas of immigrants they will be thrown out of the EU.  Despite some indications of increasing inflation, price pressure in Europe has not risen significantly despite a 0% European Central bank (ECB) Minimum Bid Rate and a negative bank deposit rate. European Central Bank (ECB) President Mario Draghi is scheduled to speak at 10:30am ET today.

USD

The US Dollar managed to strengthen against the Commodity Currencies and is trading at a 20-day peak against the EUR.  Both the Yen and Sterling were largely sideways over the weekend with the Dollar. The Yen was relatively stable along with essentially sideways ( a tiny drop in) US Treasury yields, along with some relatively strong Japanese economic data.  The main political event this week will be the meeting between President Trump and Chinese Premier Xi.  The US President specifically talked last week about currency manipulators ahead of this meeting, and, indeed, Mr. Trump has vowed to deal with North Korea if China will not.  This should be an extremely eventful meeting for markets in general.   In addition, the FOMC minutes are set for release Wednesday, and the all-important US Employment Report is scheduled for Friday.

CAD

The Canadian Dollar is trading weaker despite fairly strong oil prices, as the Bank of Canada (BoC) has maintained its dovish stance on monetary policy.  Indeed, BoC Governor Stephen Poloz has ‘talked down’ the Loonie, stressing economic uncertainty in Canada, at every opportunity despite some very strong recent Canadian economic data.  In all fairness, there is a lot of uncertainty around oil prices with stronger than expected US stockpiles coupled with uncertainty around the renewal of the OPEC agreement.   We have Canadian Manufacturing PMI and the BoC Business Outlook Survey today, Trade Balance tomorrow, and Employment data this Friday.

GBP

Sterling is trading sideways in its pairing with the US Dollar, and stronger versus the Euro, this morning in the wake of significant strength after Article 50 was triggered on Wednesday.  This seems to be as a result of market positioning coupled with an “entente cordiale” between the UK and the European Union (EU).  Indeed, Sterling was relatively quiet in the overnight session. UK Prime Minister Theresa May wants to have the new trade treaty agreed alongside the departure terms, an exit fee as small as possible, and as close as possible a trade deal with the EU as the current agreement. The EU’s first response was to repeat again its Euro 60 billion exit fee estimate, and then split up the Brexit process into stages.  Six months to agree the exit bill, and confirm EU and UK citizens’ rights, twelve months for a new trade treaty which leaves six months for each member state parliament to ratify the agreement.  Finally, the EU advised that Britain would not be able to adopt a sector by sector approach, meaning no special deal for the City of London.  This could be devastating for the UK financial sector, as some banks are announcing plans to move staff to EU locations.  Indeed, Lloyds insurance has followed suit by announcing plans to set up in Brussels, although it will not be the head office. On the economic front, UK Manufacturing PMI was a touch lower than expectation today. Construction PMI along with BRC Shop Price Index is set for tomorrow, Services PMI Wednesday, and Manufacturing Production is set for release Friday.

Euro

The Single currency fell to a 20-day low in its pairing with the Buck this morning, after plummeting from recent highs starting with the UK triggering Article 50 last Wednesday. Last week, lower German inflation coupled with a dovish European Central Bank (ECB) helped to undermine the single currency last week.  While Eurozone Unemployment was on target at 9.5% today, Eurozone PPI was lower than expected at 0.0% which also implies low inflation.  In addition, the significant uncertainty around the French election continues to loom large. The second televised TV debate for the French elections is on Tuesday, with the markets focusing on the performances of leading candidates Emmanuel Macron and Marine Le Pen.  On the economic front, we have Eurozone Retail Sales scheduled for Tuesday, and the release of the latest ECB minutes set for Thursday.  German Industrial Production and Trade Balance data is set for release this Friday.   The market seems to have had got ahead of itself pricing in even a slight tightening of monetary policy in the Eurozone, and it will look for direction here.

USD

The US held steady against the majors yesterday but interesting to note President Trump announced that he was investigating ways to punish currency manipulators and this led to a dip in the US Dollar, mainly against the Yen and Chinese Yuan. On the economic front, US GDP was better than expected 2.1% and underpinned the US Dollar. Short term US rates also firmed and although the Fed's preferred inflation gauge Personal Consumption Expenditure (PCE) was only +1.3%, that was higher than +1.2% expected and enough to keep the US Dollar supported.

CAD

The Canadian Loonie is basically back to where it was yesterday with only GDP number expected due any minute forecasted at 0.3% same as the previous month. It is the end of the month however so we could see banks selling off positions along with a large amount of US data due out this morning could result in some currency swings. Will it be enough to get us out of the 200 point range we have been confined to over these last two weeks, only time will tell.   

Euro

German CPI came in lower than expected at +0.2% rather than the expected +0.4% and gave some validity to the ECB’s dovish comments yesterday. The headline figure saw a drop from 2.2% to 1.6% and this weighed upon the Single currency across the board. The fall in German inflation was attributed to the last down leg in the oil price, and Easter being later than last year, hence lowering holiday spending. Neither of these points will encourage the ECB to start to think about slightly tightening monetary policy. In this case the Euro has been sold across the board for the last 48 hours or so, with Citigroup putting out research suggesting EURUSD goes to parity in the medium term.

GBP

The market is still holding a short sterling position and knows that GBPUSD is illiquid at the moment. In this case it needs to buy sterling against a currency other than the US Dollar, where liquidity is high. Hence it is apparent that some market participants have been doing just this by selling EURGBP, then while EURUSD is falling buying it back and ending up with GBPUSD. Some analysts are also suggesting that sterling has been firm because Brexit negotiations have so far been cordial. We have the response of the EU today to the triggering of Article 50 from Donald Tusk, the President of the European Council, let's see if that continues. On the economic front we have important economic data due for release today in the shape of UK current account data and final CPI.

USD

The Greenback managed to bounce a little yesterday afternoon after strong US confidence data and firmer US yields helped the US Dollar yesterday. US equity markets also bounced nicely at the prospect of possible tax reforms, despite Trump's defeat over the healthcare bill. Citigroup asset reallocation models are suggesting that the US Dollar will be bought for quarter-end requirements, especially against GBP, and JPY. No major Canadian news today.

GBP

Yesterday saw thin but important trading in anticipation of Brexit being triggered today, with little economic data. After the Scottish parliament in Holyrood voted for indyref#2 and as the market finally prepared for today, the pound took a dive with GBPUSD falling nearly 1% in the last few hours of trading. Northern Ireland is also surfacing as a possible departure from the UK solely due to the Brexit procedure- or could Ireland even leave the EU as 65% of its trade is done with the US and the UK, countries both outside the EU?

As for the actual letter triggering Article 50, analysts expect it to broader lay out the UK’s negotiating position but it will take forty-eight hours until we get the official response from Europe Council President Donald Tusk. The tone of the Brexit letter will be important, the FT reported that the tone of the letter will open the way for compromise in the negotiations. However, the Times newspaper quoted a senior European source as saying that “Brits must and will feel what it means to leave”, If Britain were not damaged it would be difficult to justify others remaining in the EU.

Euro

The latest OpinionWay poll for the second round of voting in the French election, has Macron on 62% beating Le Pen who would have 38% of the vote. The Single currency lost 0.5% against the US Dollar at London close yesterday, as hawkish Fed comments combined with decent US data to push the Euro from levels not seen since last November.

USD
The US Dollar is trading significantly higher in its pairing with Euro, Yen, and Swissy this morning, while on its back foot against the Commodity Currencies.  Sterling was relatively firm despite the UK triggering Article 50 as this was already expected.  The Buck got a firm boost yesterday from Federal Reserve Presidents Williams and Evans reminding them that US rates are on the rise.  In addition, US Pending Home Sales hitting a 10-month peak assisted the US Dollar in climbing yesterday.  US GDP came in at 2.1% compared to the 2.0% expected, which firmed the notion that the US economy is prepared for higher interest rates. That said, a boost in oil price pushed the Commodity Currencies higher.  Positive Canadian RMPI data helped the Loonie in particular this morning, but the entire group has pushed up against the Greenback.  While US data remains positive, and FOMC rate increases are coming, US political uncertainty seems to be capping of the Greenback to an extent.

CAD

The Canadian Dollar is broadly stronger on increasing oil prices coupled with some positive Canadian data this morning.  The RMPI figure was significantly higher than expected at +1.2% compared to the +0.8% forecast.  While worse than expected IPPI, which came in at +0.1% compared to +0.4%, balanced this somewhat the higher oil price combined with the better than expected RMPI pushed the Canadian Dollar stronger on balance.  While the Loonie is enjoying higher levels today, the dovish Bank of Canada (BoC) seems intent on talking the currency lower whenever possible.  

EUR
The Euro stalled against the US Dollar as market participants priced in the fact that Brexit is not good for the European Union (EU) either.  Headlines from the European Central Bank (ECB) said that the market was misinterpreting its recent message about interest rates and that it was very concerned about higher yields (implying lower Euro rates for longer).  This pushed the Euro lower against the US Dollar in addition to the buoyant Sterling.  Regarding Brexit, the ball now passes to the EU with one of the first comments from the EU being that they wish for an orderly Brexit.  The EU parliament President Antonio Tajani said that Britain will have to fully respect its treaty obligations until the last day of membership, while the EU parliaments Brexit negotiator Guy Verhofstadt said that the EU cannot accept that Britain would start bilateral trade talks before leaving the EU. Tajani continued that the UK could change its mind about leaving the EU, but all 27 member states would have to agree. All eyes on Eurozone CPI set for release tomorrow with worse than expected Preliminary CPI figures for both Spain and Germany released today.

GBP
Cable was relatively firm this morning, with the Pound trading strong across the board.  UK Chancellor Hammond was on the wires early saying that the Prime Minister Theresa May’s letter to the European union (EU) would go further in setting out how the UK wants to conduct Brexit talks.  Mr. Hammond continued that he was confident that the country would negotiate a customs union agreement with the EU that would allow for borders to be as frictionless as possible after Brexit. Finally, after nine months of waiting PM Theresa May advised the House of Commons that the UK had triggered Article 50.  The letter repeated the UK’s request that a new trade treaty between the UK and EU be agreed alongside negotiations of withdrawal. It also specified that in order to avoid the “cliff edge” of having to revert to WTO rules after two years, there should be “implementation periods” for certain industries and that this principle should be agreed early.  Alongside the possible “exit fee” of Euro 60 billion, these questions will be important when resolving the next direction for sterling. Today sees the publication of the “great repeal bill” white paper, which is intended to put EU law onto the UK statute and will probably see much heated debate in the House of Commons as “Remain” MP’s look to influence the terms of Brexit. 

RoW
The Commodity Currencies got a boost as US stockpile data showed a bigger than expected drawdown in stockpiles, and the price of oil price jumped up some 2% on this news.  There is some real worry for Kiwi and Aussie in particular as it was reported that president Trump was laying groundwork to put big tariffs on Chinese goods, which will not be good news for global trade.  The Mexican Peso has firmed considerably in its pairing with the Greenback over the last week as well.

The Yen was weaker with worse than expected Japanese Retail Sales on Tuesday evening, and ahead of CPI data tonight.  In addition, the FOMC members jawboning about higher rates firmed the Buck versus Yen as the Bank of Japan (BoJ) has been running essentially negative interest rates for some time now.  USDJPY is likely to be tied to US Treasury yields for some time as well.

The Swiss Franc was lower, but not to the extent of the Euro, as both the Credit Suisse Economic Expectations and UBS Consumption Indicator were higher than their previous releases this morning.  The connection with Euro has pulled Swissy down, but the safe-haven status and this data helped it stay a bit stronger in its pairing with the Greenback.

USD
Was under pressure and led lower by USDJPY in the morning although 110.00 is rumoured to have huge option barrier interest. Chicago Fed president Evans commented that inflation would have to be much stronger for four rate hikes in 2017, and the US Dollar eased yesterday. With Trumps healthcare defeat last week it seems like the Fed is spot on with its 3 gradual rate hikes this year. Early London trading has seen the US Dollar bounce back a touch, certainly against the Yen 110.00 appears important with rumours of a very large amount of barrier options there and also at 109.90. The logic is that if we trade at those levels there will be a lot of stop loss selling triggered.

CAD                                                                                                                                              

High times for Toronto TSX cannabis stocks as the Trudeau push to legalize marijuana in Canada by July 2018 has sent those stocks soaring. We may begin seeing this push the Loonie up as more investors hope to capitalize and invest. In other news BOC Gov Poloz is speaking this morning at Durham College but we must wait till at least Thursday of this week for Canadian RMPI (Raw Material Price Index) and IPPI (Industrial Product Price Index) to get a sense of how our Manufacturing industry is fairing.

Euro
German business IFO data was an excellent 112.3 and better than last month’s 111.1, which helped the Euro to push higher against the US Dollar. However Peter Praet, a member of the ECB’s governing council said that despite the recent increase in headline inflation, underlying inflation pressures remain subdued. He continued that the ECB will continue to “look through” any changes to prices which are judged to be transient.

GBP
The main news was US Dollar weakness alongside Fridays IMM data, showing a tiny rise in net GBP short positions to a new 22 year high as reported by Reuters. This helped GBPUSD push higher to levels not seen since February 2nd. Although not of immediate importance the Ernst & Young Item Club forecasters today said that Britain’s financial services sector will continue to grow over the next two years, with an acceleration after Brexit. On the political front First Minister Nicola Sturgeon is still pushing for a referendum over the next two years and Scottish parliament will vote on this today. Although they may vote for another referendum Westminster has to give the final say, so Sturgeon she is unlikely to get her wish. Since the June referendum vote and ensuing flash crash last October, the sterling market has been thin and illiquid with some analysts suggesting this situation could continue until Brexit is concluded.

USD

Last week it was all about the US healthcare bill. It’s ultimate non-vote meant that the US Dollar underperformed last week with this theme continuing in Asian trading today. The market is now concerned that the whole reflation Trump trade will collapse if the new administration can’t get their plans through Congress whilst they have control of both houses. The logic follows that if healthcare reform can't be passed, what are the chances of tax reform and infrastructure spending being passed? This latest news has knocked the US Dollar with the market now looking to the release of final GDP on Thursday and the Fed’s chosen inflation gauge core Personal Consumption Expenditure on Friday.

CAD
With iron ore and oil prices falling it was a tough week for the commodity currencies, the AUD falling back after testing higher resistance levels against the US Dollar. The Opec meeting over the weekend considered extending the latest production cut deal so this has been positive for the Loonie. BoC Governor Poloz speaks on Tuesday and we have the release of Canadian GDP on Friday.

Euro
Last week the Single currency squeezed higher against its developed market peers. Fridays PMI data for both services at 56.5 and manufacturing at 56.2 were nice beats over expectations, and with an ultra-accommodative central bank the Eurozone economy may well be due for a period of expansion. Germany has been very vocal about the rising inflation levels in Europe (which now has German headline inflation at 2.2% and was last seen in August 2012) and wants the ECB to start tapering its QE programme, so the start of interest rate tightening could help the Euro as well. This morning has seen the Euro gap open higher after the non-vote on the US healthcare bill, whilst Thursday’s Eurozone CPI release will be important for the Euro.

GBP
Last week saw more short covering for sterling as UK CPI at +2.3% and retail sales at +1.4% were both higher than expected. This Wednesday the UK kick starts its divorce proceedings from the EU, with Sir Tim Barrow the UK’s ambassador to Brussels delivering the Article 50 letter. The 24 month exit clock starts ticking, but this is a long awaited event and the market has been selling pounds since the Brexit vote, so the market reaction will probably be very different to last June's move. UK PM May will also release a white paper on the Great repeal bill this Thursday, which has the aim of installing many European laws on the UK statute. The first hurdle that the UK will have to surmount is actually to get to the start line for negotiations on a new trade deal with the EU. EU chief negotiator Michel Barnier commented; “the sooner we agree on the principles of an orderly withdrawal, the sooner we can prepare our future relationship”. This means that the EU and UK need to agree the supposed Euro 60 billion leaver’s fee. This includes payments for EU politician’s pensions and could easily see acrimonious debate. Brexit is certainly the main theme of the hour and will be to come, but it may well pay to keep an eye on the bigger picture. It was reported today that the Gulf Arab states want to sign a trade deal with the UK as soon as Brexit is official. The UK’s future could well rest not only on Brexit terms but mainly on the new trade deals to be agreed with the US, China, India and the Commonwealth. On the economic data front the week is topped off with UK current account and CPI data on Friday.

USD
The Greenback was mixed in fairly tight ranges overnight, but continues to be generally weaker in the wake of last week’s Federal Reserve Bank meeting.  The Buck traded quietly overnight as Federal Reserve Chair Yellen didn’t touch on economics in her speech yesterday, and market participants are squarely focused on the US healthcare vote. Indeed, President Donald Trump made an ultimatum that Congress either vote on the American Healthcare Act today or be stuck with Obamacare for good.  Currently, there is a significant amount of infighting between Republican factions about the reforms.  Speaker of the House Paul Ryan (R-WI), arguably the most powerful Republican legislator in Washington, did state that ‘for seven-and-a-half years we have been promising the American people that we will repeal and replace this broken law … and tomorrow we’re proceeding.”  This vote could potentially be used as a barometer on the chances of other policies proposed by President Trump passing in the foreseeable future.  A successful vote will demonstrate to the American people that this administration can effectively cooperate with Congress to legislate their campaign promises.  However, a failed vote could underpin a perception by some of a fractured relationship between President Trump and Congress which could result in difficulty moving forward with the changes advocated during the campaign. The US Durable Goods data is on tap for this morning, but all eyes are on Washington today.

CAD

The Canadian Dollar is trading a bit weaker as oil remains soft and ahead of the key CPI data set for release this morning.  On the oil front, OPEC and non-OPEC countries meet in Kuwait this weekend to discuss the production cut agreement and its effectiveness.  On the other hand, recent economic data out of Canada has been very positive.  Canadian Employment data has been strong since September with significant job growth and a notable drop in unemployment.  Last month the Canadian CPI reading was significantly better than expected, and Retail Sales data was also higher than expected.   Assuming a strong number today, it will be interesting to see whether the Bank of Canada (BoC) will continue with their explicitly dovish stance in the near future. 

Euro
EURUSD has rallied back nearly to the highest level since November 11 which it hit Tuesday after a limited sell-off yesterday as both Eurozone Flash Manufacturing and Services PMI came in just above expectation. The Manufacturing PMI came in at 56.2 compared to 55.3 expected, while Services PMI data was released at 56.5 versus the consensus of 55.4 this morning.     The European Central Bank (ECB) said that survey data pointed to robust Q1 Eurozone growth, alongside increasing the emergency funding cap for Greek banks to Euro 46.6 billion.  This positive ECB outlook is helping fuel market participants’ expectation of some potential steps away from Quantitative Easing (QE) by the ECB in the future.   That said, the ECB’s key Minimum Bid Rate is still at 0%, the bank deposit rate remains at -0.4%, and the Eurozone central bank remains committed to their asset purchase program for the remainder of this year.  While it seems the ECB has been less dovish recently, their actions remain accommodative at this time.

GBP
Cable is trading just a touch lower but remains in striking distance of its one-month peak from yesterday.  Despite Article 50 set to trigger next Wednesday, the British Pound has been quite strong.  Sterling got a boost from the reading of February retail sales yesterday as the figure came in at +1.4%, which was a huge improvement on Januarys -0.5% figure and better than the estimated +0.4%.  Some analysts had expected a weak figure, but this positive surprise helped boost Sterling yesterday. Bank of England (BoE) Deputy Governor Ben Broadbent added to the bullish Pound sentiment, saying that it was quite possible that interest rates could go up in the UK.   This statement combined with MPC Member Kristin Forbes dissenting vote to raise interest rates last Thursday as been very supportive of Sterling despite likely Brexit developments in the near future.  However, the Pound is not likely to be out of the woods yet as the start of Brexit negotiations with the European Union (EU) continue to loom large.

RoW
The Commodity Currencies generally traded lower due to soft oil and iron prices.  The Aussie, Kiwi, and Rand all traded lower overnight.  Traders will be watching any news from the meeting in Kuwait this weekend for guidance regarding whether the OPEC production cuts will be renewed. 

The Japanese Yen softened a touch with the US 10-year Treasury yield ticking up just a bit.  While the 10-Year Treasury yield is generally important for the US Dollar as higher yields for what is considered the safest asset in the market make it more attractive.  However, USDJPY in particular has been following US Treasury yields up and down.  Lower than expected Flash Manufacturing PMI for Japan last night did not help the Yen either.  However, the Yen remains very strong as a result of the market selling the Buck in the wake of last week’s Fed meeting coupled with its safe-haven status.

The Swissy followed the Euro stronger in tis pairing with the US Dollar overnight.  The Swiss currency has benefited from traders selling the US Dollar against the Euro combined with its safe-haven status.  The Swiss National Bank (SNB) continues to hold significant Euro reserves from the days of peg mechanism which keeps Swiss tracking Euro versus the Buck for the most part.

USD

The US Dollar is trading stronger against most rivals – except both Yen and Swiss which are both safe haven currencies – despite the 10-year US Treasury Bond yield continuing to fall a bit. US equity markets closed down yesterday which underpins risk aversion in markets, and a flight to safety coupled with a dip in the  10-yearUS Treasury Bond has further assisted a dip in USDJPY to a 4-month low and a 45-day trough in USDCHF.  That said, risk aversion has weighed further on Euro, Pound, and the Commodity Currencies.  Indeed, the latter were lower on soft oil prices as well.  The Loonie weakened on this oil sell-off despite the better than expected Canadian Retail Sales Data from yesterday.  However, uncertainty around the new Presidential Administration remains negative for the Greenback and seems to be capping its range against most rivals at the moment.  Confusion over the future of the Obamacare bill, a potentially isolationist trade policy, accusations of phone tapping,  continued rumors of Russian influence in the US election, and no specific mention of the promised stimulation for the economy are likely to continue to weigh on the US Dollar until more is revealed.  In particular, financial markets are watching what the Republican Congress will do regarding Obamacare as President Donald Trump explicitly promised to scrap this legislation during his candidacy.  The bill may be voted on tomorrow, and it is predicted to be a very close affair.  Market participants are concerned is that if the bill gets bogged down and Trump can’t get it through soon we will not see tax cuts or stimulus spending this year.  We have US housing data and US Crude Oil Inventories this morning. 

CAD

The Canadian Dollar weakened on softening oil prices overnight coupled with some doubt that the better than expected Canadian Retail Sales data yesterday will be enough to shift the Bank of Canada (BoC) explicitly dovish stance.  However, it seems that even yesterday’s Retail Sales data, which was the highest ion 7 years, may not be enough to shift BoC Governor Stephen Poloz from his easy monetary policy bias.  This dovish stance seems to be calculated stance in order to keep the Loonie relatively weak in order to support the export-driven Canadian economy.  That said, no move is expected in Canadian interest rates in the foreseeable future at the moment.  In addition, USDCAD traded higher as all Commodity Currencies fell given the oil price seems to be testing the key $50 a barrel level again.   All eyes om the Canadian Annual Budget release today followed by the CPI data on Friday morning.

EUR

The Euro slipped from the highest its November 11th peak in its pairing with the US Dollar yesterday, but EURUSD remains at an elevated level in the wake of the FOMC decision last week.  The French TV debate was a significantly positive factor for the single currency this week, as any  indication that French Presidential Candidate Marine Le Pen will not win the election is positive for the Eurozone overall.   However, in another negative political development for the Eurozone, Turkish President Recip Tayyip Erdogan said that Turkey can no longer be threatened by the European Union (EU) membership process or migrant deal.  He continued by saying that a “very different Turkey” in EU relations will be born after the April 16th referendum. The Eurozone Current Account was also lower than expected at 24.1B compared to 29.3B expected, and a small downward revision to the last figure to 30.8B from 31.0B.  These negative Eurozone factors were somewhat balanced by falling US Treasury yields coupled with traders  starting to doubt the ability of Trump to galvanize the US economy in the near term.

GBP
Cable slipped a touch this morning, but does remain in striking distance of the 45-day peak it touched yesterday.  The surging British Pound was further assisted by the higher than anticipated UK CPI release yesterday.  Once again, the headline figure was quite a strong number coming in at 2.3% which was above both last month’s +1.8%, and estimates for this month of +2.1%.  In addition the Core CPI figure followed suit coming in at +2% YoY compared to the +1.7% consensus, and +1.6% previous number. The CBI survey of industrial trends was also positive for Sterling as it found nearly 25% of businesses said their exports were above normal, which is not a total surprise given recent Pound weakness but positive nonetheless.  Regarding Brexit, the EU announced that it would have a Brexit summit on April 29.  At that summit It will agree on a timetable for the Brexit talks between the remaining 27 nations, which will probably see the starting point for the Brexit talks in June.  That uses up two of the twenty four months dedicated for negotiations, and is not a positive for sterling.  On the flip side the latest IMM sterling positions showed the market holding a £6.7 billion short position, this will certainly be a factor when Article 50 is triggered next Wednesday.

USD

The US Dollar is trading stronger against most rivals – except both Yen and Swiss which are both safe haven currencies – despite the 10-year US Treasury Bond yield continuing to fall a bit. US equity markets closed down yesterday which underpins risk aversion in markets, and a flight to safety coupled with a dip in the  10-yearUS Treasury Bond has further assisted a dip in USDJPY to a 4-month low and a 45-day trough in USDCHF.  That said, risk aversion has weighed further on Euro, Pound, and the Commodity Currencies.  Indeed, the latter were lower on soft oil prices as well.  The Loonie weakened on this oil sell-off despite the better than expected Canadian Retail Sales Data from yesterday.  However, uncertainty around the new Presidential Administration remains negative for the Greenback and seems to be capping its range against most rivals at the moment.  Confusion over the future of the Obamacare bill, a potentially isolationist trade policy, accusations of phone tapping,  continued rumors of Russian influence in the US election, and no specific mention of the promised stimulation for the economy are likely to continue to weigh on the US Dollar until more is revealed.  In particular, financial markets are watching what the Republican Congress will do regarding Obamacare as President Donald Trump explicitly promised to scrap this legislation during his candidacy.  The bill may be voted on tomorrow, and it is predicted to be a very close affair.  Market participants are concerned is that if the bill gets bogged down and Trump can’t get it through soon we will not see tax cuts or stimulus spending this year.  We have US housing data and US Crude Oil Inventories this morning. 

CAD

The Canadian Dollar weakened on softening oil prices overnight coupled with some doubt that the better than expected Canadian Retail Sales data yesterday will be enough to shift the Bank of Canada (BoC) explicitly dovish stance.  However, it seems that even yesterday’s Retail Sales data, which was the highest ion 7 years, may not be enough to shift BoC Governor Stephen Poloz from his easy monetary policy bias.  This dovish stance seems to be calculated stance in order to keep the Loonie relatively weak in order to support the export-driven Canadian economy.  That said, no move is expected in Canadian interest rates in the foreseeable future at the moment.  In addition, USDCAD traded higher as all Commodity Currencies fell given the oil price seems to be testing the key $50 a barrel level again.   All eyes om the Canadian Annual Budget release today followed by the CPI data on Friday morning.

EUR

The Euro slipped from the highest its November 11th peak in its pairing with the US Dollar yesterday, but EURUSD remains at an elevated level in the wake of the FOMC decision last week.  The French TV debate was a significantly positive factor for the single currency this week, as any  indication that French Presidential Candidate Marine Le Pen will not win the election is positive for the Eurozone overall.   However, in another negative political development for the Eurozone, Turkish President Recip Tayyip Erdogan said that Turkey can no longer be threatened by the European Union (EU) membership process or migrant deal.  He continued by saying that a “very different Turkey” in EU relations will be born after the April 16th referendum. The Eurozone Current Account was also lower than expected at 24.1B compared to 29.3B expected, and a small downward revision to the last figure to 30.8B from 31.0B.  These negative Eurozone factors were somewhat balanced by falling US Treasury yields coupled with traders  starting to doubt the ability of Trump to galvanize the US economy in the near term.

GBP
Cable slipped a touch this morning, but does remain in striking distance of the 45-day peak it touched yesterday.  The surging British Pound was further assisted by the higher than anticipated UK CPI release yesterday.  Once again, the headline figure was quite a strong number coming in at 2.3% which was above both last month’s +1.8%, and estimates for this month of +2.1%.  In addition the Core CPI figure followed suit coming in at +2% YoY compared to the +1.7% consensus, and +1.6% previous number. The CBI survey of industrial trends was also positive for Sterling as it found nearly 25% of businesses said their exports were above normal, which is not a total surprise given recent Pound weakness but positive nonetheless.  Regarding Brexit, the EU announced that it would have a Brexit summit on April 29.  At that summit It will agree on a timetable for the Brexit talks between the remaining 27 nations, which will probably see the starting point for the Brexit talks in June.  That uses up two of the twenty four months dedicated for negotiations, and is not a positive for sterling.  On the flip side the latest IMM sterling positions showed the market holding a £6.7 billion short position, this will certainly be a factor when Article 50 is triggered next Wednesday.

USD
The US Dollar has continued to follow the 10-year US Treasury yield down in its pairing with the majority of its counterparts.  The Buck is lower in its pairing with most of its rivals, with Euro, Pound, Loonie, and Swiss surging versus the Greenback in particular.  The Euro touched its strongest versus the US Dollar, since November 11th,  Cable hit a 45-day peak, USDCAD hit a 22-day peak, and USDCHF traded to a 41-day low.  The Commodity Currencies also traded higher versus the Buck generally, with the exception of the Australian Dollar which did hit a 4.5-month high yesterday, as Brent Crude Oil crept back over 52$ overnight.  Reuters reported that US Secretary of State Tillerson will skip the next NATO meeting on April 4-5 in favor of attending President Donald Trump's meeting with Chinese President Xi Jinping at Trump's Mar-a-Lago resort in Florida on April 6-7,  followed by a trip to Russia later in the month.  The FBI confirmed that it was investigating Russia's  potential interference in the US election. The US Current Account was better than expected this morning, but there was a downward revision to the previous number. 

CAD

The Loonie traded up in its pairing with the broadly sold US Dollar overnight.  The Canadian Dollar was supported by an uptick in oil coupled with better than expected Retail Sales data this morning.  Headline Canadian Retail Sales came in at +2.2% compared to +1.5% expected, and the Core figure came in at +1.7% compared to 1.3% consensus.  This is a very positive inflationary release for Canada and immediately sent CAD to a fresh 22-day peak in its pairing with the US Dollar.  Further positive Canadian data point may pressure the Bank of Canada (BoC) to alter its stance to at least neutral from dovish at the moment.

GBP
When it was announced that Theresa May would trigger Article 50 on March 29th, the immediate reaction for GBPUSD was one of being quite unmoved. GBPUSD didn’t move so much, although it eventually slid lower on the day and this could well point to the market starting to focus on how the actual Brexit process will be conducted and how the UK economy will behave in the short and medium term. We have the release of UK CPI this morning, after last weeks noted concern by the BoE over inflation if we get a high reading this will encourage shorts to buy sterling.

Euro
Yesterday, Germany’s “Wise men” basically called for a tightening in ECB policy. They expected German inflation to jump to 2.2% in 2017 from its 2016 level of 0.5%, and continued that in their opinion the ECB should start to wind down its bond buying programme “as soon as possible”. In a continuation of the G20 spat between the US and Germany the “Wise men” rejected criticism of the German current account surplus and said that president Trump’s stance posed a threat to the international trade system. This left the Euro quite unmoved during the day but in the evening it pushed higher after the French TV debate between five of the leading candidates in the French Presidential election. The two and half hour TV debate saw Marine Le Pen relegated to 3rd place out of 5 last night, with the Euro heaving a sigh of relief.

USD
Market participants have continued to sell the Greenback in the wake of the FOMC rate increase last week.  In yet another "buy the rumor, sell the fact" move, market participants have confounded some analysts by seemingly ignoring the fundamentals which clearly point to a US economy which is stronger than most of its counterparts.  Indeed, the Buck hit a fresh three-week low in its respective pairings with both the British Pound and Yen overnight and hit a 4.5-month low with the Australian Dollar.  EURUSD continues to trade near the 42-day high (February 6th) touched Friday, but the Greenback did post some modest gains versus Euro overnight.  The US Dollar has followed the 10-year US Treasury Bond yield down after it touched a one-year high last week. At least some of the US Dollar weakness is also attributable to continued uncertainty regarding President Donald Trump and his administration's actual plans. Despite President Donald Trump becoming a bit more moderate in international trade, the G20 communique did not formally reject protectionism.  On a relatively quiet US data front this week the highlights include several FOMC members speaking,  with a speech by Federal Reserve Chair Janet Yellen set for Thursday morning,  and US Durable Goods Orders on Friday.

CAD

The Canadian Dollar did weaken a bit in its pairing with the US Dollar overnight but remains much stronger than before the FOMC decision.    USDCAD is just a touch higher this morning, as the Loonie was under pressure on a softer oil price in addition to worse than previously released Manufacturing Sales Data last Friday.   The Canadian data came in at 0.6% Friday morning along with a downward revision of the previous release to 2.1% from 2.3% as well.   While this is not necessarily top tier Canadian Data, all weak inflationary  supports the dovish Bank of Canada (BoC) stance.  This is a much busier week for Canadian data with Wholesale Sales today, Retail Sales tomorrow, the Annual Budget Release Wednesday, and is capped off Friday with the key Canadian CPI release.   Traders will be watching the CPI release carefully as it was significantly higher than expected last month, and this is a key inflationary indicator.  

Euro
Last week could prove to be a turning point for the Euro.  While EURUSD sold-off a  bit this morning, the cross is still trading close to its highest level since February 6th which was achieved on Friday.   On the interest rate front, European Central Bank (ECB) member Ewald Nowotny spoke about the possibility of raising the bank deposit rate, which is seen as a step toward normalizing Eurozone rates as it is currently negative, and certainly supportive of the single currency.  On the political front the Dutch election resulted in less seats than initially expected for the anti-European Union (EU) PVV party and  ultimately produced a consensus Government.  As a result, Market Participants have pared their expectations for the chances for a Marine Le Pen, and anti-EU National Front, victory in the key French election.  That said, Brexit and the US Election are recent standout reminders for markets that politics are hardly predictable. From a technical market perspective, the Euro has broken up through some critical resistance points,  and if EURUSD pushes up another 1%, then forecasts of parity for EURUSD this year are likely to change.  The ECB Economic Bulletin is scheduled for release on Thursday, with Flash Manufacturing and Service Data for the Eurozone set for release Friday morning.

GBP
Sterling had a good week last week gaining some 2.5% against the Greenback and 1.5% against the Euro.  Indeed, Cable (GBPUSD) traded to a fresh three-week high this morning. The Bank of England (BoE) was the cause as it expressed concern over inflation in its meeting minutes, and MPC voting member Kristin Forbes actually voted to increase the Official Bank Rate last week which was considered more hawkish than expected.  This week the market will look to UK CPI, RPI, and HPI tomorrow, along with Retail Sales on Thursday to gauge the economy’s performance.  January’s CPI was +1.8%, and Decembers 1.6%.  After last week’s comments from the BoE a reading of 2.0% could give the Pound another short term boost.  Retail sales may well post contradictory data as they fell 0.3% last month and 1.9% in January.  On the political front with the Chancellor forced into a U-turn over national insurance hikes, the conservative party being fined £70k for breaking election funding rules and Prime Minister Theresa May having to deal with a potential second Scottish referendum it was a difficult week.  However, the Brexit bill did pass through Parliament and now has Royal assent so Article 50 could be triggered anytime. 

USD
The US Dollar continues to trade on its back foot as a result of market participants’ speculation that the Federal Reserve Bank would shift from three to four rate increases this year.  Thus, market perception is that the FOMC was less hawkish than expected.   However, the Fed has been very direct since December that they are on course for three rate increases this year.  The US central bank did nothing to fuel this four rate hike speculation.   Further, the US is the only major economy raising rates.  Indeed, the key Fed Funds rate started the year at 0.50% - 0.75% so three 0.35% rate hikes is a 100% increase of 0.75% ultimately.  Not surprisingly, the 10-year US Treasury Bond yield followed suit and fell from the one-year high it hit earlier this week which is helping undermine the Buck as well.  There seems to be a wide double standard with the markets eye toward the US compared to its counterparts.

The G20 Meeting starts today and will go into the weekend.   Both trade and currencies will be discussed at the key meeting. US Treasury Secretary Mnuchin has stated that the administration was still considering a border tax, but that President Donald Trump did not want any trade wars.  Further, Treasury Secretary Mnuchin continued that a stronger US Dollar was a sign of growing confidence in the US economy and is a good thing in the long term.  This is a bit conflicted: does the administration want a strong Buck or a weak one?

CAD

The Loonie continues to trade on strong footing in its pairing with the weakening US Dollar.  Brent Crude Oil prices creeping over $52 per barrel helped support the Canadian Dollar as well.  The Bank of Canada (BoC) remains vocally dovish, and despite rising rates for Canada’s largest trading partner – the US – the Loonie remains stronger against the Greenback in the wake of the FOMC meeting this week.  Canadian Manufacturing Sales are set for release this morning.

GBP
Cable continues to benefit from yesterday’s Bank of England (BoE) announcement coupled with the market selling the Buck in the wake of the FOMC meeting Wednesday afternoon.   While the BoE did keep its Official Bank Rate steady at 0.50%, the MPC vote was not unanimous with MPC member Kristin Forbes voting for a rate hike.  This was the first split vote since July 2016 and the meeting minutes notably conveyed that “it would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted.” The British Pound firmed significantly on this news despite continued Brexit uncertainty.   On the topic of the Scottish referendum, UK Prime Minister Theresa May also said that it was “not the right time” for Scotland to have another referendum, as the UK Government was negotiating Brexit terms for the whole of the United Kingdom.  Sterling was also supported by German Finance Minister Schaeuble who commented that it was in the EU’s interest to have a strong financial center, and that it was not feasible to move all of the City’s operations abroad.

Euro
The single currency continues to trade in striking distance of the nearly 40-day peak it touched Wednesday afternoon in the wake of the federal Reserve Bank policy announcement. The leader of the Dutch right-wing Party for Freedom (PVV) Geert Wilders, gained some 5 seats more than he had previously, but still didn’t manage to gain as many seats as predicted.  This election result was seen as a positive for the Eurozone as the PVV favors exiting the European Union (EU) like many right-wing parties, including the French National Front.   Market participants, and the broader world, are looking at this as a foreshadowing of the key French elections where Marine Le Pen, and her anti-EU National Front, remains a viable contender for President.  The result implied the chances of a Le Pen victory in France were further away than had previously been expected, and the market looked to economic fundamentals for further guidance. The Euro was supported by tighter US Treasury/Euro bund spreads in addition to European Central Bank (ECB) board member Ewald Nwotny, who said that deposit rates could be hiked before raising the refinancing rate.  He was joined in Euro bullish sentiment by ECB board member Peter Praet who said that deflation was being subdued due to the ECB policy moves.

RoW
The Commodity Currencies steadied after the FOMC fireworks with BOJ confirming that there was a very high bar to tapering its ultra-easy policy.  Worse than expected Australian Employment Data coupled with a miss in New Zealand GDP stalled the groups rally a bit.  However, on balance, AUD, CAD, NZD, MXN, and ZAR are all higher in their respective pairings with the broadly weaker US Dollar in the wake of the FOMC policy announcement Wednesday afternoon.

The Japanese Yen remains significantly stronger in the wake of the Dollar sell-off in the aftermath of the FOMC meeting this week.   This is despite rock bottom yields for Japanese Government Bonds, and the fact the Bank of Japan (BoJ) made it very clear overnight yesterday that they would not be abandoning Quantitative Easing (QE) anytime soon.  The BoJ is seen as intentionally leaving rates low to make sure the Yen remains weak as this is a trade advantage for the struggling Japanese economy.

The Swiss Franc is one of the biggest winners against the weakening Buck as it touched a 37-day high versus the US Currency in the Wake of the Swiss National Bank (SNB) yesterday. The SNB kept rates unchanged yesterday morning and stressed that the Swissy remains overvalued.   The Swiss central bank continues to maintain that it will intervene in the market as long as necessary, but Swissy rallied against the Buck anyway as a result of a large inflow of investment from Europe and the UK in the face of significant uncertainty.

USD
The FOMC raised the key Fed Funds rate by 0.25% to 0.75%-1% yesterday in line with market expectation, but the US Dollar managed to trade broadly lower yesterday afternoon.  One factor is market participants have been predicting that the Federal Reserve Bank would shift from its clearly conveyed three rate increases to four for this year.   However, the Fed took a  familiar tone in their post-meeting statement, highlighting that Interest Rate Increases “will be gradual” this year.   The perceived dovish tone of FOMC Chair Janet Yellen in her post-meeting press conference served to push the Buck lower.  In the background, the US 10-year Treasury Bond yield fell to a low of 2.49% from this week’s one-year high of 2.62%, reflecting this recalibration to 3 Fed rate hikes from this floated expectation of 4 increases.  The Greenback traded broadly lower against nearly all of its counterparts yesterday afternoon,  touching a 38-day low in its pairing with the Euro, 16-day trough against the Loonie and Yen, 17-day low versus the British Pound (after BoE this morning), one-month low in its pairing with Swiss Franc, and three-week low in its pairing with the Australian Dollar in the wake of the Fed meeting.  The Euro got some extra assistance from the Dutch elections, as the anti-European Union (EU) PVV performed worse than some expected.  This helps market participants calm over the upcoming French elections, but if we all learned one thing in 2016 it is that the electorate is unpredictable.

CAD

The Canadian Dollar touched a 16-day peak in its pairing with the Buck yesterday afternoon in the wake of the FOMC meeting.  The Loonie got an assist overnight from oil, as Brent Crude crept over $52 a barrel after recent lows. That said, the main catalyst for the move was US Dollar weakness after the Fed meeting.  That said, it remains clear that US interest rates will continue to go up, while the Bank of Canada (BoC) has clearly conveyed no appetite to raise their key Overnight Rate in the near future.  We have Canadian Foreign Securities Purchases this morning.

GBP
The British Pound extended gains this morning, trading up to a 17-day high in its pairing with the broadly weaker Buck this morning in the aftermath of yesterday afternoon’s FOMC meeting coupled with today’s Bank of England (BoE) meeting.  The Bank of England (BoE) kept its key Official Bank Rate steady at 0.25% with only one dissenting vote.  Lone hawk Kristin Forbes’ dissent coupled with a mention of inflation concerns, is more hawkish than anticipated on balance.  Monetary Policy Committee (MPC) members unanimously voted to keep the Asset Purchase Facility steady at 435B. However,  BoE Governor Mark Carney had previously made it clear that he intends to keep rates low in the face of Brexit uncertainty.  Indeed, Mr. Carney, among other many MPC members, had reflected previously that some inflation is a product of Sterling rapid and steep fall.  Brexit and another potential Scottish referendum continue to leave uncertainty as the main theme for the Pound in the near future.

Euro
The Euro has fallen a bit this morning, but maintained much strength, after it traded to a 38-day peak yesterday afternoon in its pairing with the US Dollar yesterday afternoon in the wake of the FOMC and Dutch elections.   The single currency got an extra push  the Netherland’s center-right Prime Minister, Mark Rutte, roundly saw off a challenge from anti-EU Geert Wilder, soothing fears of an European Union (EU) break up.  The Dutch vote could now impact the French Presidential elections - eroding support for Marine Le Pen and her right-wing National Front, thus allowing the potential for further Euro gains.  However, this is another market expectation, and the Dutch election does not necessarily translate into the French one.  Last year was a tough lesson in predicting the outcome of electorate voting.  Eurozone Final CPI was on-target this morning as well.  The combination of a perceived more hawkish than expected European Central Bank (ECB) with the notion of a less hawkish than anticipated Fed is supportive of the unified currency. 

RoW
ZAR – Retail sales – 2.3%
NZD GDP - 04%
AUD - Employment change (Feb) 6.4K

JPY- BoJ IR Decision -0.10%
CHF - IR decision -0.75

The Aussie has sold off a bit on worse than expected Australian Employment data after it surged to a three-week high yesterday afternoon on the broad US Dollar sell off in the wake of the FOMC announcement.  Australian Employment Change came in at a dismal -6.4K versus expectation of +16.3K, and a previous +13.5K figure.   Australian Unemployment unexpectedly jumped 0.2% to 5.9% as a result.  The New Zealand Dollar also sold off from a 12-day peak with the Greenback yesterday afternoon on worse than expected GDP data.  The New Zealand GDP figure missed expectation at +0.4% compared to +0.7% expected, and a downward revision to the previous release from +1.1% to +0.8%

The Japanese Yen is weakening a touch after hitting a 16-day peak in its pairing with the Greenback after the broad USD sell-off in the wake of the FOMC announcement.  The Bank of Japan (BoJ)  kept its key rate at -0.10% in the evening, and made it very clear they would stay the course with their easy monetary policy.   Traders seem fairly certain the BoJ intends to help keep the Yen weak in the near term with their policy.

The Swissy extended it’s against the buck from yesterday afternoon in the wake of the Swiss National Bank (SNB) Monetary Policy Assessment this morning.  The SNB left its key Libor Rate at -0.75% this morning, and SNB President Thomas Jordan made clear that market intervention remains on the table as the SNB feels the Swiss currency continues to be overvalued at the moment.  Despite maintaining their record low deposit rate, European investors seem to be flocking into Safe haven Swiss assets given uncertainty in Europe.

USD
The US Dollar is trading firm this morning against Euro and Swiss Franc overnight but fell a touch overnight in its pairing with the Canadian Dollar, British Pound, Yen, and Commodity Currencies in a largely range-bound market ahead of the Federal Reserve Bank policy announcement this afternoon at 2 pm, ET.  The Buck remains supported by the 10-year US Treasury Bond yield which touched a one-year high yesterday.  The only significant US data point yesterday was PPI which came in at 0.3%, better than the +0.1% expected, but lower than last month’s 0.6% release. The US Core PPI figure was similarly better than consensus but not as good as the previous figure.  US CPI, Retail Sales, and the Empire State Manufacturing Index are set for release this morning ahead of the key FOMC policy announcement this afternoon.  Market Participants have priced in a 100% chance of a Fed rate hike and will be carefully eyeing the FOMC statement and post-meeting press conference for clues into the pace of future Fed rate increases. Is will be interesting to see the market reaction.  Higher US interest rates are certainly US Dollar positive in the long term, but we have seen a lot of “buy the rumor, sell the fact” recently.  In addition, the G20 Meetings are set to begin tomorrow morning and continue on Saturday.

CAD

The Canadian Dollar was just a touch higher as the price of oil stayed relatively firm overnight.  While Oil prices have fallen recently, the fact it is currently maintaining above $50 since touching under this key level last week is somewhat supportive.  While the Loonie was on the uptick overnight, it does remain relatively weak as a result of the Bank of Canada’s (BoC) explicitly dovish bent.  US interest rates are clearly going to rise, and given increased demand for higher yielding, and less risky, US-denominated debt, it puts the Greenback in a very good position against most of its rivals.  Canadian Foreign Security Purchases is set for release tomorrow morning, with Manufacturing Sales on tap for Friday Morning.

Euro
The Greenback remains firm in its pairing with the Euro this morning despite better than expected Eurozone Employment Change, on-target French Final CPI, and better than anticipated Italian Retail Sales this morning.  Yesterday, the German ZEW Economic Sentiment survey came in at 12.8, which was an improvement on last month’s 10.4, but was not as good as the 13.2 expected. This slight disappointment combined with a squeeze higher in US bond yields weighed upon the Single currency yesterday. The EURUSD slide was halted momentarily by a comment from German Finance Minister Wolfgang Scaheuble, who said that he wanted an increase in Euro zone interest rates.  However, the market sold Euros during US trading as it priced in concerns over the Dutch and French elections. The Dutch people vote today (polling stations close at 4pm ET) and the market will want to know if the right-wing PVV party increases its seats in the Dutch legislature.  Market participants are looking for this as a gauge of populist sentiment in Europe, and how likely it is for the National Front, and French Presidential Candidate Marine Le Pen, to make stride in the key French elections. French center-right candidate Francois Fillon has been charged with embezzlement, and is now under formal criminal investigation.  As expected, this will leave Marine Le Pen and Emmanuel Macron as front runners for the French Presidential election.

GBP
Sterling is trading higher this morning despite uncertainty as the market waits for Article 50 to be triggered, and considers the threat to the United Kingdom posed by Scottish First Minister Nicola Sturgeon’s call for another referendum.  The British Pound was assisted by significantly better than expected UK employment data this morning.  The UK Claimant Count came in at -11.3K (negative is positive), compared to +3.2K, with a small downward revision to last month’s blockbuster release of -42.4K to -41.4K.  Indeed, the UK Unemployment Rate unexpectedly dropped to 4.7% from 4.8% as well.  UK Average Hourly Earnings Index was a slight miss at 2.2% compared to the 2.4% expected, but this was a decidedly positive release on balance. Some analysts are considering that UK Prime Minister Theresa May will start to play the waiting game with the thorny issue of another Scottish referendum, in the hope that Nicola Sturgeon’s voter support will wane over time. Regarding Brexit, the European Union (EU) is now considering delaying the start of Brexit talks until June this year. This of course means that rather than twenty four months available for negotiation there will be only twenty two.  It appears that Brexit talks are likely to be strained.  


RoW
The Commodity Currencies ticked up a touch versus the Buck overnight ahead of today’s key FOMC policy announcement, as the price of oil has firmed to just under $52 this morning. Yesterday, it was announced that Saudi Arabia itself had started to increase its oil production, and this negative sentiment towards the oil price weighed on the group in yesterday’s session. Overnight Australian consumer confidence was steady at 99.7, but still below the key 100 level.   However, this data along with an increasing iron ore prices supported both the Aussie and Kiwi.

The Japanese Yen rebounded a bit in its pairing with the Buck ahead of the Federal Reserve Bank interest rate decision today.  The Yen was assisted by better than expected Revised Industrial Production which came in at -0.4% compared to the -0.8% expected/previous figure. 

Swiss Franc, along with Euro, remained relatively weak in its pairing with the Greenback this morning.  Indeed, Swiss PPI was much lower than expected at -0.2% compared to the +0.4 expected and previous figure.  All eyes on the FOMC policy announcement for Euro and Swiss today.

USD
The key US Employment Report was better than expected on Friday, but in perfect “sell the fact” fashion, the Greenback was broadly lower after the data.  The report reflected that the US economy added 235k new jobs last month, which was better than the 196K economists expected, and the previous release was upwardly revised to +238K from +227K.  US Unemployment fell by 0.1% to 4.7%, which was in line with market expectation. The only slight negative in the report was that Average Hourly Earnings, which is another key FOMC measure, came in 0.1% below the consensus figure at +0.2%.  However, given the market has priced in a Federal Reserve Bank rate increase on Wednesday, the US Dollar fell as traders squared positions ahead of the announcement.  This Wednesday is further amplified for the US because it is the day of the expiration of its debt limit extension, which is helping to undermine the Buck.  US Treasury Secretary Steven Mnuchin will have to start juggling the numbers again to ensure that the US pays all of its bills, as it’s currently overdrawn to the tune of $20 trillion, which is clearly a negative for the US Dollar.  Market participants are pricing in a 100% chance of an FOMC rate increase this Wednesday afternoon. The market will be carefully eyeing the post-meeting statement for clues to both the number and pace of future rate hikes as well.

CAD

The Canadian Dollar pared back losses from Thursday’s 70-day trough in its pairing with the US Dollar due to yet another impressive Canadian Employment release Friday morning.   The Canadian economy added 15.3K jobs, compared to only +0.6K expected.   This is especially positive as there have been several favorable Canadian Employment Change releases, and this caused a surprise drop in Canadian Unemployment to 6.6% from 6.8%.  This was highly supportive for the Loonie, as the Bank of Canada (BoC) has had a decidedly dovish bent recently.  BoC Governor Stephen Poloz has stressed uncertainty in his last two post-meeting statements.  Indeed, one would actually think USDCAD may be higher if it weren’t for a sharp drop in oil prices last week.  Reports of significantly larger than expected US stockpiles, coupled with uncertainty whether the OPEC production cut agreement will be renewed in June, weighed heavily on oil prices.  Canadian Foreign Securities Purchases are set for release at 8:30am Thursday, and Manufacturing Sales MoM are on tap for Friday morning.

EUR
European Central Bank (ECB) President Draghi didn’t say much but has caused the Euro to push higher after being more positive about European economic data.  The ECB left rates on hold last week, and is continuing with its planned asset purchase program.  However, while certainly not hawkish, the ECB was less dovish than the last few post-meeting press conferences.  The Dutch elections are set for Wednesday, and while the market is aware that the chances of the right-wing Party for Freedom Dutch political party gaining power are below 5% now.   However, the vote will be used to gauge the level of European voter sentiment towards the National Front (Marine Le Pen) in France. We have the key German ZEW Economic Sentiment Survey for release tomorrow, Eurozone Employment Data on Wednesday, and the Eurozone Final CPI data for Thursday.

GBP
Cable ticked up as the US Dollar weakened in the wake of the US Employment Report Friday morning.  However, Sterling was significantly weaker against both the Euro and the US Dollar last week on balance as a result of uncertainty around Brexit. The UK Budget was the highlight release last week, although it was seen as broadly currency neutral.  Article 50 is the main headline at the moment as the Brexit bill goes through parliament.  UK Prime Minister Theresa May was reminded at the European Union (EU) summit on Friday that the EU wants to make the UK be worse off in the wake of Brexit.  The Financial Times (FT) is reporting today that Article 50 could be triggered as soon as tomorrow, and the EU has let it be known that they want a leaving fee of Euro 60 billion to start negotiations on a new trade treaty.  UK legal sources have advised that this fee is not enforceable by law so the Brexit talks could easily start off on the wrong foot.  Further, the UK is potentially facing another Scottish referendum to leave in favor of staying in the EU.   UK Employment Data is scheduled for Wednesday, and the Bank of England monetary policy meeting is on scheduled for Thursday.

RoW
The Commodity Currencies recovered from from significant pressure last week and bounced back Friday morning on the weaker US Dollar after the US Employment Report.   Falling oil and metals prices have weighed on the group in general.  AUD, NZD, ZAR, and MXN all bounced back versus the weaker US Dollar on Friday, but the group remains exposed if the Greenback rebounds after the Fed meeting Wednesday.  We have Australian Employment Change on Wednesday evening. 

The Swiss Franc recovered in its pairing with the US Dollar along with the Euro on Friday.  Swiss PPI MoM is scheduled for tomorrow, and the Swiss National Bank (SNB) Monetary Policy Assessment, along with the key Libor Rate, is set for Thursday morning.

The Japanese Yen clawed back some losses due to broad US Dollars selling, after USDJPY touched two-month low early Friday morning.  Japanese PPI was on target overnight, but Core Machinery Orders and Territory Industry Activity both missed.  The Bank of Japan (BoJ) monetary policy meeting is set for Thursday.

USD
All eyes were turned to the release of the important Non-farm payrolls employment number which came in better than expectations at 235K over the 200K expected. Expectations had been growing all week that we’d be seeing a good number so this isn’t much of a surprise. The main worry was that a big miss could cause the Fed to hesitate on their rate hike, this fear is now almost completely wiped out as rate hike expectations for next week are near 100%.

CAD
Canada had a great jobs number yet again with a 15.3K increase over the 0.6K expected. This marks 7 numbers in a row that Canada has had a positive number, the last 5 of which have come when expectations showed Canada losing jobs. The gains were from an increase of 105,100 full-time jobs and a drop of 89,800 part-time jobs. This is a great release for Canada, with the only mark on it being that wages have stayed relatively flat. We’re seeing Canada make small gains against some of the last week’s losses.

GBP
As the spotlight has not been on Sterling recently it had a quiet morning, although Angela Merkel did say that the Brexit vote was a wakeup call for the EU. Scotland’s First Minister Sturgeon announced that she considered autumn 2018 as a potential time for another independence vote. Chancellor Hammond’s tax rise on the self-employed is causing some negative headlines for the Government, it seems like there may be a delay at least until they are implemented. The release of Manufacturing Production came in below expectation at -0.9% under the -0.6% expected.

Euro
Squeezed higher in the morning as the market bought back some of its short positons, and speculated that ECB President Draghi may mention something along the lines of interest rate normalization. The ECB held interest rates steady, but in its guidance to investors it omitted a reference to using all weapons in its policy arsenal because of the success against deflation. ECB President Draghi expanded on this by saying that the ECB no longer had a “sense of urgency” to take further action on monetary stimulus, and that policy makers “do not anticipate that it will be necessary to lower rates further”. All in all positive news for the Euro which has stabilised since this upbeat message from ECB President Draghi.

USD

USD has been quiet since yesterday morning but has had a very strong week clawing back much of the losses it’s suffered over the year. Today ISM Manufacturing comes out at 10, we’re expecting a strong number, but unless expectations are off significantly it shouldn’t move the currency too much. Instead, eyes will be on Yellen’s speech at 1:00. All week Fed members have been implying a March rate hike was likely, which has contributed to the strengthening USD. If Yellen goes against the grain we may see USD/CAD fall quickly. It’s an unlikely event, but be prepared.

EUR

Euro remains quiet on the data front today but has moved stronger against CAD and USD this morning. Next Thursday the ECB press conference and Interest Rate Decision will give an indication of the economic outlook for Europe, rates are expected to remain the same but the market will look for any unusual language used by Draghi. The market has been dominated recently by the Fed rate discussion and this could allow EUR to grab some attention. Expect the EUR to come under significant pressure of US Jobs Figures on March 10th.

GBP

It’s been a week of disappointing GBP number and the Services PMI release continued that trend, coming in under expectations at 53.3 versus 54.2 expected. This has continued GBP’s slow downward descent against most of its peers. Note that within two weeks Article 50 may have been triggered, with no trade agreement in place British MP and Secretary of State for Exiting the European Union David Davis warns of a harsh Brexit, yet remains confident a deal will be made in time. Also today UK PM Theresa May is set to give a speech in Scotland attempting to focus on UK unity and avoid a fresh Scottish independence referendum.

USD

Unemployment claims came out this morning at 223K better than the 243K expected. Despite the beat, the market has turned full attention to the 80% chance of an Interest Rate hike in March. Another strong day of US data (ISM Manufacturing beating expectation and Crude Oil inventories showing high demand) have added strength to the case put forward by Yellen last month. Fed Reserve Gov. Brainard (usually Dovish) stated: “improving the global economy and solid US recovery would mean a rate hike would be appropriate soon.” Yellen speaks tomorrow as well as three other FOMC members which will hopefully solidify the rate change expectations.

CAD

The Bank of Canada kept rates unchanged at 0.5% yesterday as expected. With the Fed in the US looking like it will raise interest rates again the gap this has been the primary driver between the strengthening USD against CAD. This morning Canadian GDP came out better than expected, with an annualized rate of 2.6% against 2.0% expected. This usually would push CAD stronger but we’re seeing it hold steady so far. There has been a broad focus and strengthening of USD recently and that appears to be holding. That’s all for Canadian data this week.

GBP

Sterling came under significant pressure yesterday amongst its peers. Poor manufacturing PMI came in under expectation (55.6) at 54.6 yesterday. With Purchasing managers usually having early access to data about their company’s performance, this can be a good indicator of overall economic activity and therefore this reading was taken as bearish for the Pound. This morning UK Construction PMI was released and was relatively close to expectations coming in at 52.5 against 52.2 expected. Markets, however, continue to focus more on political news, and the focus this month will be Article 50 starting Brexit likely to be triggered on March 15th and a New Budget on the 8th.

USD

The US Dollar is broadly higher today and has touched nearly two-month peak in USDCAD, a one-week high in its pairing with the Euro and Swiss Franc, a 44-day trough in USD/GBP, and 13-day high vis-à-vis Japanese Yen as well this morning.   The market shrugged off worse than expected US Preliminary GDP yesterday morning after hawkish statements from two key Federal Reserve Bank figures gave significantly hawkish statements yesterday.   In the afternoon, US trading saw San Francisco Federal Reserve President John Williams get the market going, before President Donald Trump, by saying that a March rate hike was under serious consideration.  Indeed, Mr. Williams, clearly a voting member of the Federal Open Market Committee (FOMC), stated that there was no need to delay hikes and that the stock market was not out of whack.  Importantly, New York Federal Reserve President William Dudley joined the chorus by saying that the case for a rate hike is now more compelling.  This, combined with Federal Reserve Chair Janet Yellen’s more hawkish than expected testimony to congress earlier in February, has moved the March rate hike expectations from 38% to a staggering 87% in about a week.  After this significant move in March rate hike expectations President Trump’s speech was a bit of an anti-climax as yet again the new President lacked detail in his plans and left the market asking for more clarity.  Once again the fundamental strength of the greenback, based in the high likelihood of rising US interest rates, was tempered by market participants’ concern over the lack of details available in President Donald Trump’s economic plans.  This morning sees US Core PCE Price Index, Personal Income, and Personal spending due out an 8:30 am ET today.

CAD

The Loonie fell to a 44-day low in its pairing with the greenback overnight ahead of today’s key Bank of Canada (BoC) policy announcement at 10:00 am ET today.  Preceding this is the Canadian Current Account release at 8:30 am and RBC Manufacturing  PMI  at 9:30 am but all eyes are squarely on BoC Governor Stephen Poloz’s post-meeting statement today, as nobody expects the BoC to move rates at all.  Yesterday, Canadian IPPI missed consensus by a touch, while RMPI was a bit higher than anticipated.  That said, given the extremely positive Canadian CPI figure from last week, and the blockbuster Canadian Employment Data from earlier in February, economists will be watching if BoC Governor Poloz changes his slant from downward on rates to at least neutral given he did say that the Bank of Canada is prepared to cut its Key Overnight rate if warranted in the near future which was significantly more dovish than consensus at that earlier  time.

Euro

The Single currency is trading lower in this pairing with the US Dollar, but higher vis-à-vis Sterling and JPY,  in the wake of a very near miss, which was essentially on target, for Eurozone Final Manufacturing PMI this morning.  The figure was released at 55.4 compared to 55.5 previous and consensus. That said, the real market mover on Euro falling could be the support of Marine Le Pen for French President hitting a record high this last Monday in new polling.  Ultimately, regardless of political allegiance, Le Pen is vocally anti-European union and this is not good for the unified currency. The US Dollar got a boost versus the Euro yesterday from the aforementioned hawkish comments from FOMC voting members Dudley and Williams which implied the Federal Reserve Bank may indeed raise rates on their March 15 policy announcement.

GBP

Sterling fell to a 44-day low in its pairing with the US Dollar and weakened in its pairing with the Euro as well this morning.   New Bank of England (BoE)  Monetary Policy Committee (MPC) member Charlotte Hogg testified yesterday in front of Parliament and stated that the BoE's tolerance for temporary above target inflation will depend on events.  This helped to support the pound yesterday despite Scotland’s First Minister Nicola Sturgeon saying Prime Minister Theresa May was nudging Scotland towards another referendum.  Overnight USD/GBP was soft on the back of the aforementioned hawkish comments from FOMC voting members.  The UK Government is set for defeat on the Article 50 Brexit bill in the Upper House regarding the issue of protecting the rights of European Union nationals.  If the Government is defeated then the Brexit bill will be passed back to the House of Commons for another vote, which may well cause delay to the triggering of Article 50 but probably not delay it past the deadline of March 31.  David Davis, the Brexit Minister, also advised yesterday that the UK must be in a position to govern itself from day one of Brexit.  That means huge spending on IT systems to allow goods and people to be monitored in and out of the country. In other words, the Government needs to be able to walk away from the EU if it considers the European Union deal to be worse than World Trade Organization rules. In other words, a hard Brexit is a real possibility. This means in the short to medium term the outlook for GBPUSD is not positive as Brexit looms, the UK consumer is slowing and US interest rates are pushing higher.

USD
The US Dollar was a bit stronger in this pairing with the majors this morning while surging against the Canadian Dollar ahead of the key Bank of Canada meeting tomorrow.  Further, the greenback was sideways with the British Pound, despite sterling rallying elsewhere.  All eyes on US Prelim GDP Data QoQ scheduled for 8:30 am ET.  Yesterday, US durable goods jumped 1.8% last month slightly above the 1.6% forecast, but the main news was again made by President Trump as he is prepared to speak to Congress today.  Yesterday he talked about increasing defense spending by 10%, which gave a huge boost to defense stocks and the US equity markets duly rose. Trump said that this spending will come from cuts in other departments, but in spite of this US interest rates pushed higher as well. Today Trump actually makes his speech to Congress outlining his plans for the economy and in particular on tax, although yesterday he did say that he had to wait until the cost of changing Obamacare was calculated before announcing tax cuts.
 
CAD
The Canadian Dollar slipped this morning along with a drop in oil prices, and ahead of the key Bank of Canada policy announcement tomorrow.  Given the blockbuster Canadian Employment Data coupled with Friday’s much better than expected Canadian CPI, market participants will be squarely focused on BoC Governor Stephen Poloz’s post-meeting statement.   In his previous post-meeting press conference he left the door open to cut rates if warranted, which implies that the only move the BoC is considering at the moment is cutting rather than raising rates.  That said, it will be very interesting to see if he changes his tune in the wake of this better than expected February data.
 
Euro
The single currency is a bit lower in its pairing with most of its rivals this morning in the wake of worse than expected French Prelim CPI today.  This was balanced somewhat by on target French Preliminary GDP, and Italian Preliminary CPI coming out better than expected. That said, the Euro seems to be back out of the spotlight to an extent as Marine Le Pen slipped in the French Presidential polls.  It was also helped higher by a rise in economic sentiment to 108.00, and industrial sentiment increasing to 1.3 from last month’s 0.8.  market participants will be focused on the upcoming European Central Bank Meeting, Brexit negotiations, and upcoming Eurozone inflationary data for the single currency.
 
GBP
While USD/GBP itself was basically sideways, the Pound did increase against the Euro a bit this morning.  It is well worth remembering that the currency markets are thin and nervous at the moment whilst they face well above average uncertainty in the UK, Europe, and the US.  In the particular case of GBPUSD, after an early tumble blamed on a combination of another Scottish referendum and a possible House of Lords rebellion over the Brexit bill. Once traders remembered that the Scottish Parliament needs the agreement of UK parliament to call a referendum and Theresa May gave a large resounding “No” to this, GBPUSD pushed back up.  Sterling was quiet overnight but with market participants aware that Article 50 is due to be triggered in a few weeks’ time, the probability of sterling weakness is high.

USD
Trump is set to give his first major policy speech to Congress tomorrow, with the expectation being details of the budget and infrastructure spending. However, like everything with this office, we don’t know what to expect and often when we get it, we don’t know what it means. If the policy released is too vague, we may see this weaken US dollar. Conversely a high spending budget that will promote inflation as he has been suggesting during his campaign could see the USD strengthen.
As for actual data releases Core Durable Goods came out this morning at -0.2% well below the 0.5% increase expected. This should have little effect on markets as eyes still look to tomorrow’s speech. For the rest of the week we have a good number of releases including GDP on Tuesday, Consumer Confidence Wednesday and Unemployment on Thursday. We expect USD to break from the ranges it’s been bound to this week.

CAD
It was a quiet week for the Canadian dollar, as it traded in tight ranges across most majors a trend that looks to continue today with no major data releases. This week’s biggest news will come Wednesday morning with the Bank of Canada meeting regarding a rate change. Expectations are that interest rates won’t move but we’ll be looking to see if there’s any change in sentiment with the statement that’s due to be released. After that on Thursday is the monthly GDP release, expected at .3%.

GBP
The pound dipped this morning over continued tension with Brexit and the increasing likelihood of a possible Scottish referendum for independence. Reports have said Theresa May is expected to end free movement for new EU migrants next month, this will help the slow clarification of what Brexit will actually mean and how it will affect those in Britain. For the rest of the week we are light on GBP news, with this Wednesday’s Manufacturing PMI numbers, Thursday’s Construction PMI and Friday’s Services PMI being the number’s to watch.

USD

USD is trading a touch weaker in it pairing with the EUR, Canadian, Yen, and Sterling this morning.  While the market remains largely range-bound overnight. The US Currency has pulled back generally as market participants are backing off the notion of a rate increase at the Federal Reserve Banks next policy announcement on March 15th, with many trades now anticipating the next increase to occur on May 3rd or June 14th instead of in accordance with the recent Federal Reserve minutes released  Wednesday afternoon.   That said, Federal Reserve Chair Janet Yellen did say in her testimony to the USS Congress that it is ‘unwise’ to wait on raising rates as rapid rate increases in the short period of time can be a shock to the economy.  Indeed Federal Reserve Chair Yellen did testify after the FED meetings were originally put together, so this is not a certainty & some economist are dissenting with the feeling that the Federal Reserve Bank may raise rates on March indeed.  Clearly, the FED is not bounded by anyone & an independent body so this remains to be seen.  

Ultimately, the US Dollar remains underpinned by the notion that US rates are riding in a stark positive contrast to most of its counterparts, while also capped as it is exposed to the pervasive uncertainty around the new Presidential administration of Donald Trump. 

CAD

CAD is stronger the last few days, although sideways from late afternoon yesterday ahead of  Canadian CPI Dataset for 08:30 AM ET this morning.  Canadian Retail Sales were disappointing on Wednesday morning.  Canadian Retail Sales MoM disappointed @ -0.5% headline given a consensus of +0.1%, but the previous figure has increased a touch to 0.3% growth from previous +0.2% today.  However the Core Retail Sales MoM number was released at -0.3% compared to consensus increase of 0.8%, along with a downward revision to -0.1% from 0.1% growth the last release.   Yesterday Corporate Profits came in at +3.6% versus the previous release of 14.0% so this is also not a rosy number.  That said, earlier this month the Canadian blockbuster Employment data somewhat balances this, but all eyes are on the key CPI data due shortly.   Any inflationary or employment data is key as Bank of Canada Governor  Stephen Poloz disappointed hawks in the wake of the last  BoC meeting as he said that any near-term moves in rates would likely be down if the Canadian Economy Necessitated it.  however, it is important to acknowledge that he did not necessarily advocate a rate decrease, although he made clear it could happen combined with dampening any idea hawks had about rising rates. 

EURO

While the Euro ticked up a bit in it’s pairing with the greenback overnight. The pair remains within tight ranges over the last few days.   The President of the Bundesbank Jens Weidmann said the European Central bank should discuss whether it should continue to signal the possibility of more expansionary policy, this came against a backdrop of Bundesbank publishing its lowest profit in decades due to losses incurred from the ECB’s quantitative easing policy.   In more positive news for Germany, it posted a Euro 23.7 billion budget surplus for last year.  There are as usual many suggestions as to what Germany should do with this surplus, but the numbers are in stark contrast to Greece where Germany is insisting that Greek debt is repaid in full.  The possibility of a Marine le Pen victory in the French Presidential Election continues to disturb the markets, despite the fact that she will have many hurdles to surmount to take France out of the Eurozone even if she is elected.  Given the potential issues around Brexit, the strong possibility of a Le Pen presidency could be devastating to the Eurozone given her strong vocal anti-European Union stance. 

GBP

USD/GBP  squeezed higher this morning largely on the aforementioned US Dollar pull back largely on the fact that, according to the FOMC minutes released on Wednesday afternoon,  the next Fed rate may be in May or June rather than the next month some traders were expecting.   Yesterday, GBP ticked a bit lower, in the wake of Austria’s Chancellor Christian Kern stating that Brexit was “going to be costly” for the UK.  United States Treasury Secretary Steve Mnunchin then commented that US Dollar strength reflected confidence in the US economy.  The afternoon was a different matter as the market focused on later comments, again from Mnuchin, which encouraged US Dollar sales and the Pound duly scampered higher accompanied by GBPEUR.  Generally, the British Pound is stronger this morning, assisted by solid BBA Mortgage Approvals which came in at 44.7k compared to 41.9K  consensus with a small upward revision to 43.6k from 42.2k additionally.  Not surprisingly,  market participants remain squarely focused on Brexit as Article 50 is set to trigger next month with the market really wondering how this will occur procedurally, the UK trade agreement with its largest Eurozone partner, plus how long the process will actually take to complete this significant process. 

USD

As expected, the FOMC minutes released late last night gave little news, as many Fed members have already expressed their views since the meeting.  This actually caused the greenback to fall slightly, but it remains at very attractive levels against most rivals, as there was nothing new supporting more action than anticipated.  USD increased ahead of these minutes preparing for this to potentially be more hawkish than expected, thus when it was released in line it caused the a US Dollar to pull back a little bit.  One negative note on the minutes was the fact that while FOMC voting members think the economy is going to continue to improve but that "Trumponomics" make the outlook somewhat more uncertain. Although "many participants" expect a rate hike "fairly soon", only "a few participants" expect a hike "at an upcoming meeting". The minutes showed that "uncertain" is still the main message from the Fed and this word was this time mentioned 14 times. May or June still seems more likely for a US rate hike but a bumper jobs report for February could increase the chances for a March move.  That said, the greenback is still in striking distance of the 42 (now 43) day high it hit yesterday in its pairing with EUOR at the moment.  The Commodity Currencies were stronger overnight as oil ticked up.  Yen strengthened on better than anticipated SPPI YoY – which is an inflationary measure of the pricing of goods purchased by Japanese Corporations on an annual basis.- yesterday night which was released @ +0.5% compared to 0.4% economists’ consensus growth along with an upward revision to 0.5% from 0.4% on the previous number.   Further, some uncertainty continued to benefit Yen combined with the recent visit of President Donald Trump where he did not address Japanese or Chinese currency manipulation as some expected.  This latter notion was a boon for the Commodity Group + Japanese Currency given the intertwined issue of trade with both the US & China and US international trade in general.   Essentially, Japan is an exporter with a lot of goods going to the  US, and the Yen can sometimes be significantly affected by sentiment on China as well.  For the Commodity Group, and AUD + NZD in particular, their supply to China is essential so worsening US & China trade relations could impact US demand.  Notably, the Mexican Peso is significantly higher as President Trump has not said anything negative about NAFTA in the last few weeks either. 

CAD

The Loonie was up in its pairing with a weakening US Dollar despite worse than anticipated Canadian Retail Sales yesterday as oil ticked up in addition to a softer greenback.   Canadian Retail Sales MoM disappointed @ -0.5% headline given consensus of +0.1%, but the previous figure was increas3eed a touch to ).3% from +0.2% today.  However the Core Retail Sales MoM number was released at -0.3% compared to consensus increase of 0.8%, along with a downward revision to -0.1% from 0.1% growth the last release. Canadian inflationary data carries a lot of weight at the moment since Bank of Canada Governor Stephen Poloz did leave room for a rate cut if necessary based on Canadian economic performance.  This does not mean there will necessarily be a rate cut, but heavily implies the BoC will not raise rates, and their next move would likely be down if any move would occur.  Today Corporate Profits is due @ 08:30 AM today with key Canadian CPI MoM + YoY data set from tomorrow @ 0830 AM as well.

EURO

The Euro fought back yesterday afternoon versus the USD given aforementioned traders reaction to the FOMC minutes,  and, perhaps more importantly,  the centrist politician Francois Bayrou offered to form an alliance with the presidential candidate Emmanuel Macron.  Mr. Bayrou won less than 10% of the vote in 2012 and had no chance of victory himself, but he would have drawn votes from Macron.  After Bayrou’s announcement to support Macron the implied probability of Macron winning the French Presidential Election rose from 34% to 38%.  Anything that reduces the chances of Marine Le Pen becoming the next president of France is perceived as positive for the Euro and that is why we saw a reversal of trend.  Given Brexit especially, this French election is very key for the entire Eurozone as a whole given what is potentially at stake in a Marine Le Pen victory.

GBP

GPB/USD was a touch higher this morning as the greenback weakened a bit, and British Pound was a little lower in its pairing with the EURO after it a  hit 2-month highs against the single currency yesterday.   Yesterday’s GBP rally versus EURO was in the wake of an opinion poll on Monday showed French presidential candidate Marine Le Pen gaining ground.  The poll suggests the anti-European Union & nationalist Le Pen may have more chance of springing a surprise if she makes it through to the second round of the elections in May.   that said, the Pound fell a bit vis-à-vis EUR  as this new development regarding Francois Bayrou mentioned above could dampen Marine Le Pen’s Presidential hopes.  The closer a French populist shock becomes, the more the pound will begin to look like a safe haven relative to the Euro & vice versa.  The pound has now gained around 4% against the Euro since the middle of January.   Sterling gains ran out of steam yesterday morning despite data that showed UK growth in the final quarter of 2016 was slightly stronger than initial estimates.  Revised figures said GDP rose by 0.7% with a better performance from manufacturing behind the upward revision from 0.6%. However, business investment fell 1% and there were signs of a tougher year ahead as household spending slowed.  All eyes on the unfolding of Brexit as article 50 is about to trigger next month.

USD
The US Dollar is somewhat mixed ahead of the release of the Federal Reserve Minutes at 01:00 PM ET today followed by Federal Reserve Governor Jerome H Powell speaking @ 2:00 PM ET as well today.  The greenback is trading higher in its pairing with EURO, Swissy, and the Canadian on the back of fundamentally favorable US Dollar factors including expectations of rising interest rates combined with domestic economic figures supporting consistent Federal Reserve Bank rate tightening for the long term.  The Dollar has traded to a 39-day peak in its pairing with Swissy this morning, a fresh 42-day peak vis-à-vis the EURO, and a 15-day peak in its pairing with Loonie as well.  That said, favorable Japanese Flash Manufacturing PMI and All Industries Activity MoM released Monday evening coupled with some market uncertainty has pushed the Yen to a three day high versus the greenback, Sterling has traded sideways on news that Bank of England Governor Mark Carney stated that smooth Brexit negotiations would be consistent with conditions for rising interest rates, and the Mexican Peso soared to its highest level since the day of the US Presidential Election on November 9th of last year.  The Federal Reserve Bank is talking quite a lot at the moment about the possibility of a rate hike in March.  It doesn’t like to shock the market and when it last hiked rates in December the market gave this move a 100% probability.  Currently, it is giving a March rate increase 35% probability so there is much work for them to do, and possibly much US Dollar strength to come if they are to actually move in March.  Traders will be carefully eyeing the FED minutes at 1PM for clues into the specific pace of FOMC tightening in the future.

CAD

Loonie fell to a 15-day low against the generally stronger US Dollar as Canadian Retail Sales MoM disappointed @ -0.5% headline given a consensus of +0.1%, but the previous figure was increas3eed a touch too ).3% from +0.2% today.  However the Core Retail Sales MoM number was released at -0.3% compared to consensus increase of 0.8%, along with downward revision to -0.1% from 0.1% growth the last release.   This data along with upcoming Canadian inflationary data over the next two days is getting special attention give Bank of Canada Governor Stephen Poloz left room for BoC rate cut if necessary in the aftermath of his last meeting.  Tomorrow morning @ 08:30 AM ET Corporate Profits QoQ is up for release, and Canadian CPI Data is set for Friday morning at 08:30 AM ET in a relatively busy Canadian Data schedule for this week.

EURO
The EURO fell to a fresh 42-day low in its pairing with the US Dollar this morning.  It was interesting to note that on a day when EU’s Juncker told the UK that it faced a “very hefty” Brexit bill from Brussels, Eurozone February Services PMI was a very healthy 55.6, nicely above last month’s 53.7.  While Eurozone & German manufacturing releases were nicely above expectations, the unified currency lost ground to both US Dollar & Pound this morning.  It does seem like the market is pricing in European political risk and this is weighing on the single currency. Certainly, the difference between German & French bonds pricing is widening as investors worry over a Marine Le Pen Presidential victory in the upcoming French Presidential election.   Added to this concern is the news that White House chief strategist Steve Bannon told Germany’s ambassador to Washington, that the US administration hopes to conduct future relations with Europe on a bilateral basis.

GBP
While USD/GBP was initially soft yesterday as Bank of England Chief Economist  Andy Haldane said that interest rates are two sided and symmetric, implying that the market should not be so sure of rate hikes coming in the face of inflation. However, as he continued he said that the plans for Brexit were now not expected to affect growth over the next three years. The market also took heart from BoE Governor Carney who said that if the Brexit negotiations were to “go smoothly” then that would be consistent with a higher path for interest rates.  Overnight this strength continued, especially against the Euro while more sideways against the generally strong US Dollar this morning.

USD

The US Dollar is broadly higher across the board as traders firmly expect an FOMC rate increase after yet another FED speaker noted such. Yesterday Philadelphia Federal Reserve Bank President Patrick Harker said in an afternoon interview with Market News International late Monday, during the US Bank Holiday, that a March US rate rise was on the cards as long as personal consumption expenditure supported it, with the comment broadly supporting the US Dollar.  Another Federal Reserve voting member signaling near-term rate increases is significantly US Dollar positive. The US Dollar soared to a fresh 41-day peak in its pairing with the EURO,  a one-month peak vis-à-vis Swissy after just exceeding the 6 days high by a touch,  five-day high versus Pound & Yen, a 13-day peak in its pairing with the Loonie as well.   While recent domestic data combined with clear messages from the Federal Reserve that rate hikes are imminent pushing the US Currency higher, there is still some concern over potential controversy coming from the new Presidential administration which some traders feel puts a temporary near-term cap on the  Dollar given market participants are feeling out President Trump’s administration to see if there may be negative effects on international trade given some of his recent isolationist rhetoric. 

CAD

The Canadian Dollar is weaker in its pairing with the broadly stronger greenback despite an uptick in Oil prices, but mainly sideways in versus the EURO this morning.  While there was a US Bank Holiday yesterday, there was also Provincial Canadian Holiday including Ontario& Alberta as well.  However Canadian Wholesale Sales MoM was higher than expected yesterday @ +0.7% compared to +0.4% expected which was good on balance despite a minute downward revision to 0.1% from 0.2% on the previous data release.  This is a significant week for Canadian Data with Retail Sales MoM tomorrow, Corporate Profits QoQ Thursday morning, and the key CPI MoM data Friday as well.   The Loonie is weaker today but has generally been trading in relatively tight ranges against a stronger US Dollar given recent positive Canadian Economic Data combined with fairly tight but generally rising oil prices.  All eyes on this week's inflationary data as Bank of Canada Governor Stephen Poloz implied the Bod may cut rates if the economy needs it.  Another spate of good data this week could pour cold water on this idea given recent solid data including the last blockbuster employment data.

EURO

The EUR has fallen to a 41-day low in its pairing with the soaring US Dollar as rising US interest rates are in contrast with 0% rates in Europe combined with further asset purchases & other Quantitative Easing (QE) measures by the European Central Bank as well.  In addition, there is continued concern about how the upcoming elections in Europe will change all dynamics, and especially in France where anti-European Union + far right wing Candidate Marine Le Pen still leads the Presidential polls.  That said, European Flash Manufacturing & Flash Services PMI were both better than anticipated this morning.   In addition today German Finance Minister Schaeuble said that Greece was on the right path, although a refinancing deal has not been agreed as yet and overnight the Euro gave back some of its recent gains on hawkish comments from the Philly Fed President.  The unified currency is a bit weaker on some fundamental factors given the spate of positive US Data, combined with Federal Reserve Bank advocating rising interest rates in contrast to faltering growth & QE in Europe as a whole while adding in the aggravating factor of serious concerns about the upcoming elections.

GBP

Cable is trading lower largely due to the rising U Dollar on expectations of rising US Interest Rates with Bank of England Governor Mark Carney dampening any ideas about a BoE rate hike during his last official BoE statement.  Public Center Net Borrowing was released at -9.8B compared to -14.4B expected, with a slight positive downward revision to +4.2B from 6.4B for the previous number.  While the sharply negative (good in this case) number is positive reflecting a sharp decrease in the figure in line with expectation, it was not nearly as low as the expected figure.  This was not the worst case scenario, but still GBP negative in general.  Yesterday was a quiet day with the US Presidents Holiday, although GBPUSD enjoyed a small bounce as the Brexit bill was debated in the Lords.  UK Prime Minister Theresa May kept a watchful eye on the Upper House and it would surprise the market if they stopped the Government triggering Article 50 by the end of March.  Market participants are focused on Brexit & how this will affect the UK + Eurozone as it unfolds.

USD

The US Dollar is sideways in its pairing with EUR, + CHF, up versus a broadly weaker Sterling,  just a touch stronger in its pairing with the Loonie, but trading lower vis-à-vis JPY this morning.  The Pound was weaker across the board due to significantly lower than consensus Retail Sales MoM supporting the Bank of England notion that the extreme weakening of GBP post-Brexit has had a negative impact on the buying power of the UK consumer.  In contrast, yesterday was yet another strong day of US data with US Building Permits, Philadelphia Fed Manufacturing data, and US Housing Starts all released at higher than consensus levels.  Indeed even weekly Unemployment Claims were a touch lower than expected.  That said, market participants seemed to not take note and we saw the greenback lose ground in its pairing with the EUR yesterday morning.  While the US Dollar is benefiting from fundamental expectations of rising Federal Reserve Bank interest rates, it is tempered by some uncertainty around the new Presidential Administration.  Further, with a US Bank Holiday on Monday, traders may be squaring positions ahead of the long US weekend.  Notably, President Donald Trump did say “I inherited a mess” yesterday referring to both US Economy combined with foreign policy at the moment.  indeed he notes that companies were moving jobs out of the country, and specifically noted to Mexico, thus weakening the Peso specifically.   There is nothing odd about the President’s stance considering President Barack Obama repeatedly referred to the “mess” he stepped into in the wake of President George W Bush for the first few years of his Presidency as well.  MR. Trump did confidently note that his administration “will take care of it” though.    Market participants will continue to eye any comments from the US President or the administration for clues into future policy.  Today Vice President Michael Pence will meet with European business leaders as he stresses America’s commitment to Europe. "We are the most secure and most prosperous when both the US and Europe are strong and united,” the adviser said, previewing the trip. The Federal Reserve Bank will meet next week to deliver latest minutes, any language relating to a March rate hike should be monitored closely.   There is no headline data for the USA today with only CB Leading Index at 10:00 AM ET this morning.  Additionally,  Monday is a Bank Holiday so there may be thin trading from this afternoon through Tuesday morning

CAD

Loonie was a bit weaker versus USD this morning as oil lost a little ground overnight.   Overall, the Commodity Currencies all ticked down in their pairing with the US Dollar ahead of the Holiday weekend.  the aforementioned comments from President Donald Trump were a bit disparaging on international trade as he did note that “companies are leaving our country” yesterday which is not good for the Commodity Currencies in general.  There was very little data for Canada this week, and Monday is both a US & Canadian Bank Holiday so markets did seems to consolidate favoring safety, reflecting an uptick in Japanese Yen, ahead of it.   That said, it is notable the Canadian Dollar has been trading in fairly tight ranges in its pairing with the  US Dollar in recent weeks.  Nest week, Canadian Retail Sales (WED) Corporate Profits (THU) and CPI (FRI) will be watched closely given Bank of Canada Governor Stephen Poloz indicating that he would consider cutting their key rate by 0.25% based on how the Canadian economy performs.

EURO

Fundamentally EURUSD was trading sideways overnight, but the single currency did bounce back yesterday versus the greenback and was up overnight in its pairing with the British Pound this morning.   Nothing of any substance was released yesterday in Europe.  We saw the Single Currency rally against GBP & USD as the US Session opened despite another good set of domestic US economic Data once again. The market seems to be focusing on the risk attached to Marine Le Pen’s Front National movement (now 9/4 odds on being elected).  Next week CPI in Europe will give a measure of purchasing trends and therefore inflation.  As touched on previously, the Euro is struggling to make ground long term against its peers due to the Political uncertainty coupled with the consistently strong fundamentals being released from the US.  Some of the EUR consolidation may be position squaring ahead of the US Holiday weekend, and generally, despite some serious concerns, the unified currency has been resilient.

GBP

The British Pound ceded back essentially all of the ground it made in its pairing with the greenback overnight largely on worse than expected UK Retail Sales this morning.  The Data was in @ -0.3% compared to +0.1% consensus, and a downward revision to the previous number to -2.1% from -1.9% as well.  this data supports the Bank of England notion that UK Consumer buying power is shrinking due to the immediate weakness in Pound post-Brexit vote.  Indeed, uncertainty for the UK remains heightened with Article 50 set to trigger next month beginning the process of the UK leaving the European Union officially. Former UK PM Tony Blair will announce a "mission" to try and persuade UK citizens to "rise up" and change their minds on Brexit today.  The consensus is that this will have no real impact and Article 50 will be triggered in the coming weeks.  Wednesday next week UK GDP will give insight into the overall health of the UK economy and will give weight to any advancements on Interest Rates and of course the sentiment around leaving the EU next month (process begins next month while depending on how the plan unfolds some economists predict this will take years to resolve).

Have a Great Long Weekend.

USD

USD took a step back overnight as it fell against the majority of its counterparts in the overnight session today.  While the greenback is still within recent ranges against most of its rivals despite falling this morning, notably, the Australian Dollar touched its highest level versus the greenback since November 8th – the day of the US Presidential Election and prior to the rally that followed.  Better than consensus Employment data last night pushed the Aussie to this level plus the New Zealand Dollar ticked up to a one-week high versus the Dollar as well.  Generally, the Commodity Currencies in have been stronger versus the greenback than most of its counterparts given more stable Oil price given the 90% compliance of OPEC members reducing concerns that Iraq, among other members, would not cooperate with the recent agreed upon production cut.  In addition, given the positive meeting President Donald Trump had with Japanese leadership, there is a feeling he is backing off somewhat from his rhetoric strongly criticizing governments manipulating their currencies to be weaker combined with the current state of international trade vis-à-vis the United States.  In particular, Kiwi + Aussie are tied to Chinese demand.  Clearly, the Canadian Dollar is benefiting from current oil prices, the significantly better than expected Canadian Employment Data on Friday, and less anti-NAFTA news recently.  That said, the fundamentals still favor the US Dollar given larger than expected US PPI on Tuesday combined with higher US CPI & US Retail Sales yesterday favor Federal Reserve Bank rate increase sooner.  In addition, Federal Reserve Chair Janet Yellen was fairly hawkish in her testimony to Congress as well.  In addition, New York Federal Reserve Bank President  William C Dudley echoed the FED view on a rate hike in the short term if figures are consistent.   The only negative US domestic figure was Crude Oil Inventories coming in much higher than expected, showing US firms are holding a higher number of barrels and highlighting a weaker demand - Crude WTI slipped on the back of this.  today we have Philadelphia Fed Manufacturing, Building Permits, and Housing starts along with weekly Unemployment Claims data.  Obviously,  any headlines from Washington may also have an impact between now and Tuesday as well given Monday is a US Holiday

CAD

Loonie has fared much better in its pairing with the US Dollar recently than many of its rivals given some positive factors for Canada recently.   Clearly, more stable Oil prices have supported the Canadian Dollar, especially given the recent IEA report showing 90% compliance with the recent OPEC agreement bucking the notion that many members, and especially Iraq, would not abide by the production cut.  Further,  last Friday the blockbuster Canadian Employment Data serve to underpin the Loonie as it is unlikely the Bank of Canada will lower rates if the labor market continues to take on such a positive tone.  Yesterday Manufacturing Sales MoM was also significantly better than expected in a light data week for Canada as well.  Furthermore, last month with President Donald Trump approving the Dakota + Keystone XL access oil pipelines it is clear that his anti-NAFTA ire is clearly focused on Mexico gave these both help Canada at the end of the day.   Clearly, Oil Prices combined with near-term inflationary data will continue to influence the Canadian Dollar in the near future.

EURO

The single currency traded higher in its pairing with the US Dollar as the greenback has generally pulled back on technical in the overnight session/. Yesterday Spanish CPI came in at the expected 3.0% and this coupled with a strong Eurozone Trade Balance figure 28.1B helped the Euro to hold against its major peers and managed to recoup some of its losses against the USD.  Excluding the European Central bank publishing Account of Monetary Policy Meeting today, European data is fairly light. It’s worth noting  The Organization for Economic Co-operation and Development has stated Italy must reform its banking system if it is to continue on a weak path of recovery, the OECD predicts a 1% growth in 2017-2018 in relation to the Italian Government reducing its budget deficit.

GBP

Cable retraced higher overnight on the weakening greenback with no UK data set for release today.   Average earnings in the UK came in at 2.6% yesterday against the forecasted 2.8%, indicating a slower growth in the change in price businesses and governments pay for labor in the UK.  The office for National Statistics also released the Claimant Count change, measuring the number of unemployed people in the UK; a positive figure -42.4K against a -20.5K supported the Pound somewhat. There is no major UK data out but the market anticipates UK Retail Sales tomorrow as an indication of January’s total value of inflation adjusted sales at the retail level -  as the biggest indicator of consumer spending this is accounts for the majority of overall economic activity.

USD
Rallied yesterday as Yellen quoted a rate likely to be appropriate at one of the next meetings if employment and inflation evolve in line with expectations, this reiterates the view that three hikes are possible. Most of the recent incoming data (PPI @ 0.6% yesterday) from the States suggests that the Labour market is continuing to strengthen and inflation is moving in line with the 2% target (next minutes are 22/02/2017). Core CPI today seemed to strengthen that position as it came in greater than expected at 0.6% which could give the Greenback more weight against its peers. Also worth noting that Crude Oil inventories are released at 10:30 EST and will contribute to the sentiment around inflation predictions thus rate hikes. Yellen’s continues to speak today so look out for further movement on her statements

CAD
The only major Canadian number for this week came out better than expected with Manufacturing Sales coming in at 2.3% over the 1.4% expected. This helped keep the USD gains from their CPI release at bay, and we’ve only seen a small fall in CAD against USD so far. The much talked about Trudeau-Trump meeting was largely devoid of any unexpected news, and CAD has remained at strong levels against most of the majors. That’s all there is this week for Canadian data, so we’ll be bound largely by the news cycle for the remainder of the week.

EURO
Poor German GDP in the morning (0.4% against expected 0.5% saw the Euro come under early pressure) in yesterday’s session. German ZEW economic sentiment (a gauge of the 6 month economic outlook) came in lower than anticipated giving the Euro no weight against a positive USD. Eurozone Trade Balance today will measure the difference in value between imported and exported goods and services; it is predicted at 22.8B so the Euro could come under further pressure today (especially if US data continues to be consistent).

GBP
Fell sharply yesterday morning as CPI missed the 1.9% growth expectation and came in @ 1.8%, this was the largest jump in the cost of UK living since June 2014. The data added concerns that that the drop in the Pound since the Brexit vote will erode consumers spending power. The release of Average Earnings data (+ Bonus) at 09.30 today will measure the change in the price businesses and Government pay for labour, thus a good indication of personal income growth, this is predicted at 2.8% which if hit should be seen as positive for the Pound. Worth noting Deutsche Bank have released a statement predicting a further 16% fall of the Pound; “The UK is one market where we have stronger views in terms of where currencies are going,” Saravelos told Bloomberg TV’s Francine Lacqua on Tuesday morning. “Being negative on the pound — bearish sterling — is one of our strongest views.” Saravelos has quoted that the Bank sees Sterling falling to as low as 1.0500 against the USD due to the uncertainty around Brexit.

USD

USD is trading a touch lower against most of its rivals ahead of Federal Reserve Chair Janet Yellen’s testimony in front of Congress today @ 10:00 AM followed by a question & answer session which will last through tomorrow.   It seems that interest rates will be a main theme during this session.  Market participants will be eyeing for any indication of pace or timing of upcoming FED rate tightening.   Despite pulling back against most of its major counterparts, the greenback did strengthen in its pairing with a weakening British Pound this morning largely due to a near miss on UK CPI today.  The UK CPI figure came in at +1.8% compared to 1.9% expected, with no change to previous figure. Furthermore, the Core UK CPI figure also missed by 0.1% as it came it @ +1.6% this morning.  Also, UK RPI missed, while UK PPI  was – both Output + Input – were above expectation.  On balance, the data fell short of fueling expectations of an upcoming Bank of England rate hike so Cable fell on this data.  Yesterday USD did hit two week peak in its pairing with Yen before pulling back today ahead of the Federal Reserve Chair testimony / Q&A this morning.  President Donald Trump gave no indication of a Bi-Lateral Trade Deal with Japan, and there was no mention of currency.  Stocks rallied on the back of this and investors saw the US President’s tax reform plans as a boost for the economy.  The US Producer Price Index MoM is set for 08:30 AM but the main issue is the testimony of FED Chair Yellen starting at 10:00 AM ET this morning

CAD

The Canadian Dollar has strengthened against the weakening greenback despite Brent Crude Oil falling a touch.  Further, the blockbuster Canadian Employment Data from Friday continues to support the Loonie as it dampens the notion that the BoC may cut rates.  Bank of Canada Governor Stephen Poloz did leave room for cutting rates if necessary in the aftermath of the last Bank of Canada policy announcement, but this hugely above expectation employment release certainly puts this on the back burner at the very least.  In addition, the entire Commodity Group was stronger vis-à-vis USD given the OPEC report coupled with a perceived cooling of President Donald Trump’s anti-international trade rhetoric.  Notably the Mexican Peso hit its highest level in its pairing with the greenback since December thirteenth reflecting this notion.  Light week for Canadian data means it will likely trade on technicals, US Dollar factors, and oil prices

EURO

German Q4 GDP out this morning at 0.4% against expected 0.5% - less than expected but still have the Euro an early start against other majors. Yesterday actually marked the first time in almost a decade that the commission has predicted all EU countries to grow during forecasting period (end of 2018). “The economic recovery in Europe continues for the fifth consecutive year,” said Valdis Dombrovskis – the Commissions Vice President. Look out of German ZEW at 10.00am which is a six month economic outlook comprising of around 350 German investors and analysts – a high reading could spur on the Euro in today’s session.

GBP

Cable was trading lower as Sterling weakened across the board largely due to worse than expected UK CPI data this morning.  The UK CPI figure came in at +1.8% compared to 1.9% expected, with no change to previous figure. Furthermore, the Core UK CPI figure also missed by 0.1% as it came it @ +1.6% compared to 1.7% anticipated.  Also, UK RPI missed, while UK PPI  was – both Output + Input – were above expectation.  On balance, the data fell short of fueling expectations of an upcoming Bank of England rate hike so Cable fell on this data.  GBPEUR rallied yesterday on the back of the European Trade Commission lifting the UK Growth forecast stating “Brexit not necessarily bad.” The European Union expects the UK to grow 1.5% against its November prediction of 1%. This falls in line with Bank of England  predicting growth to 2% from 0.8% originally in the aftermath of the Brexit vote.  Certainly volatility is likely to remain an issue with Article 50 set to trigger next month

CAD
It’s a quiet week for data with Manufacturing Sales on Wednesday being the only major release upcoming. That said, today Trump and Trudeau meet for the first time in Washington, any announcements to come out related to NAFTA or Canada-US trade in general could easily push the currencies. Late last week Fitch released a report stating that countries like Canada are most at risk of damage to their credit fundamentals, putting the AAA credit rating Canada has in danger of being downgraded if negative news comes out.

USD
Compared to Canada we have a jam-packed week for data and the US dollar, though Monday starts with no major data releases. The market will be looking to Tuesday and Wednesday as Fed Chairman Yellen is testifying before the Senate & House committee. There will be a statement on the economy followed by a Q & A, during which volatility is to be expected as the frequency of interest rate hikes is sure to be discussed. Outside of that we have CPI on Wednesday and Unemployment on Thursday among some other numbers.

GBP
CPI is due out overnight for GBP with a 1.9% expected. Later in the week employment and retail sales are also due to be released. It’s also worth noting that the BoE raised forecasts for inflation & growth earlier this month but there is still no immediate rush to raise the cost of borrowing.

USD

The US Dollar is trading higher against EUR, Swiss Franc, Yen, and British Pound this morning in the wake of Chicago Federal Reserve President Charles Evans said that he was still pushing for three rate hikes yesterday afternoon.  That said, the US Dollar was sideways with Canadian, after an uptick in oil prices, and also a bit weaker in its pairing with AUD, NZD, and Mexican Peso as well.   President Trump announced that he would make some major tax changes in two or three weeks’ time.   Additionally, President Donald Trump has had something of a change of tack regarding China after he sent a letter to Chinese President Xi Jinping saying that he looked forward to working with him to develop relations.  It was later reported in the FT that Trump has now backed the “One China” policy, this issue over Taiwan had been a cause of great concern to China.  On the currency front, a G20 spokesman commented that world currency levels will “definitely be discussed” at the next G20 meeting on March.  G20 sources continued that Germany will press the group of 20 to reaffirm its commitment to promoting its free trade, resisting currency wars and fighting climate change.

CAD                                                                  

The Commodity Currencies were firmer against the US Dollar overnight.  The Loonie was sideways against the strengthening greenback as oil prices were higher. Yesterday Deputy Governor Lawrence Schembri spoke on “Getting to the Core of Inflation” which the department's research led to conclude that the 2 percent target for CPI is still appropriate target rate. In other news PM Justin Trudeau heads to meet Trump for the first time on Monday so today's USD/CAD should be quiet until then. That being said Canadian employment numbers are due out this morning which are forecasted to be worse than the months previous so if they come in stronger obviously we should see some CAD strength with a good opportunity to buy USD if you don’t want to risk the outcomes of what Monday's meeting might mean.

EURO

EURO is trading lower versus the US Dollar, with EURUSD touching its lowest level since January 30th overnight, as continued concern about the upcoming European elections weighing on the unified currency.  Most concerning is the fact that Marine Le Pen,  President of the right-wing National Front, who loudly favors leaving the European Union is the front runner in the French Presidential election. There is currently a stark contrast in views between the International Monetary Fund and the European Union.  The IMF commenting that the level of Greek debt could become “explosive”, the head of the European Stability mechanism saying that the IMF’s analysis was not “sober” and that Greece’s situation is no “cause for alarm”   On the trade front, Germany posted a record trade surplus of EUR 252.9 billion, much better than 2015’s EUR 244.3 billion, which of course will be of interest to the new US administration.

GBP

Sterling traded lower in its pairing with the US Dollar this morning. In a market lacking economic data, it was reported yesterday that large UK corporate accounts were buying GBPUSD whilst real money accounts were selling EURGBP, which had pushed the Pound higher yesterday.   Overnight the Pound was not the main focus with the Brexit bill going through the House of Lords.

USD
USD is mixed this morning in the face of a lack of economic data, with the main excitement coming from the oil inventory figures yesterday. The significantly higher than anticipated US Crude Oil Inventories figure yesterday @ 10:30 AM pushed oil price lower first on inventory build and then sharply higher on an unexpected gas consumption rise which helped the Canadian Dollar trade higher in its aftermath.  The market will look to President Trump’s visit to Japan starting tomorrow to see how his “America First” policy will actually take shape.  Once again, the fundamental idea of FOMC rate increases this year is keeping the greenback relatively firm, while questions around how the administration of President Donald Trump will unfold.

CAD
The Loonie is trading up along with oil prices. Later this morning Canadian Gov Council Member Schembri is to deliver a speech titled "Getting to the Core of Inflation" at Western University, in Ontario. The big news for Canada releases tomorrow as Employment numbers are published at 8:30. It has been a quiet week for Canadian data so this is the first opportunity for a big movement, that’s not caused by external factors.
 
EURO
EURO is largely sideways in its pairing with the mixed US Dollar this morning with continued concern about the upcoming European elections, particularly with Marine LA Pen in France, has kept it largely within recent ranges.   The market is demanding higher compensation for investing in France, with the difference between French bond yields and Germany’s bond yields hitting new multi-year highs.   The inference of course is that Germany is a safer bet than France with the aforementioned French election looming.  It was illuminating to hear that should Marine Le Pen be elected she plans to take control of the Banque De France and use it to finance welfare payments and service the government’s debts, after leaving the Euro.  On this matter, today the UK press is full of articles about the possibility of Le Pen winning the election.  Certainly the last socialist Government failed with the departing President leaving on a 4% approval rating and with Francois Fillon (center right) insisting on continuing his campaign, Le Pen could face an opponent who the people find it difficult to vote for.  
 
GBP
GBP/USD is trading higher this morning as the British Pound is broadly higher this morning ahead of Bank of England Governor Mark Carney’s speech at  1:30 PM today.  The BoE regional agents survey had some positive moments yesterday as consumer spending growth remained resilient and investment intentions had edged higher, pointing to small increases in spending for 2017/  Export volumes growth had also risen due to the fall in sterling and stronger world growth, complementing the hiring plans had also edged up although they pointed to little change in the staffing level overall in the next six months.  On the other hand, average pay settlements will drop to 2.2% this year from 2.7% last year.  As for the Brexit vote the only concession UK Prime Minister Theresa May has had to give so far is a vote for the UK Parliament when it looks like a deal is close to being agreed.  However the vote may well not be that important as parliament will only be able to accept or reject the deal. If it rejects it then the UK automatically defaults to World Trade Organization rules and that could easily produce a hard landing.  The Brexit bill was passed unanimously last night by the Commons and will now go to the Lords.  Given this cohesion. Coupled with a ‘buy the rumor, sell the fact’ element, the Pound is trading stronger across the board today.

USD
USD is mixed this morning as the greenback is largely sideways in its pairing with  EURO, Aussie, and Kiwi this morning, while it has fallen versus GBP, CAD, and Yen.  Philadelphia Federal Reserve President  Patrick Harker started the day off talking about a March rate hike for the US, urging the Fed not “to get behind the curve” after announcing that the FOMC members, on the average, feel that US rates would rise on average 2-3 times in 2017 in the wake of their December 2016 rate increase.  Later in the day, the US trade deficit for January narrowed slightly to $44.3 billion from Decembers $45 billion.   Head of the German Bundesbank Jens Weismann called Peter Navarro’s comments on Germany manipulating a grossly undervalued currency absurd.   Logically Weidmann is correct since Germany is very efficient and the Euro is not managed by them at all.  The southern states of the EU would prefer lower rates, with more Quantitative Easing, QE,  whilst the German economy needs exactly the reverse.  The greenback is ticking up higher versus EUR & CAD over the last two days from expectations of likely upcoming rate increases by the US Central Bank, while it remains tempered by uncertainty around President Donald Trump’s coupled with the administration’s vocal weak US Dollar policy which is a continuation of the Obama administration's weak US Dollar policy in support of US manufacturing.

CAD
The Canadian Dollar is trading up a touch overnight but is down significantly for the week on sliding oil prices combined with an up-ticking US Dollar.  The Canadian January trade balance came in at CAD 0.92 billion, with Decembers number revised higher as well to over CAD 1 billion from CAD 0.53 billion. Canadian Housing Starts came in at 207K over a forecasted 202K showing there is still no sign of housing construction slowdown. Wondering if this will bring forth any new Government changes in the housing market.

GBP
The Institute for Fiscal studies commented that the UK was due for another dose of austerity because of Brexit. Alongside a fall of 0.9% in the Halifax house price index, the pound fell to technical support levels in the London morning. In the afternoon Sterling was quite range bound until later in the day when it was pushed higher after BoE Forbes commented that the UK economy may soon need a rate increase.
 
Euro
The market opened and sold the single currency straight off as it worried about European politics. The move was exacerbated by German industrial production MoM coming in at -3.0%, its worse fall in 8 years and much worse than the expected +0.2%. Greece is coming back onto the risk radar again with the market now worrying over Greece missing its fiscal targets. They need to hit these targets to release further funds from their creditors. Currently, the IMF is refusing to provide more assistance to Prime Minister Tsipras and his ailing Government.
 

USD
The Greenback managed to strengthen against the majority of its counterparts in the overnight session.  USD was stronger in its pairing with EURO & GBP as the upcoming elections & Brexit weighed on the two respectively.  Further, the US Dollar was stronger against the Commodity Currencies as oil slipped a bit overnight, and the Reserve Bank of Australia left its key rate unchanged yesterday evening, as widely expected, and commented that a stronger Australian Dollar could complicate the economy.  In addition, the Reserve Bank of new Zealand is set to announce its policy tomorrow afternoon. The Dollar weakened against the Yen yesterday as it seems like Japan has decided to invest more in the US, creating more jobs for the US workers and thus appeasing the US President, but the greenback has made up significant ground overnight.  The US Dollar was stronger overnight, but largely in recent ranges as the bullish sentiment resulting from the Federal Reserve Bank explaining their intentions of 2 or 3 rate increases this year in the wake of their December rate increase is balanced by continued uncertainty over the Trump administration. Canadian loonie was significantly weaker as slipping oil prices coupled with US Dollar strength weighed on the loonie overnight.

EURO
The single currency is trading lower in its pairing with the US Dollar this morning.   It seems like politics will be the main stimulus for the markets this week with the spotlight on the French election.  It should be taken with a large pinch of salt, but a French OpinionWay poll already showed Macron beating Le Pen in the second round of voting 65% to 35%.  Presidential candidate Fillon is under pressure to quit the presidential race after investigations into his affairs. This political news, as well as easier bund yields (being softer lower Euro interest rates), weighed on the Euro all day.  Just to complete this weakening Euro scenario European Central Bank President Mario Draghi, reiterated again that he will keep interest rates low and QE in force as the current push higher in inflation is only "temporary". Draghi is looking at core inflation which is steady at 0.9%.   The latter factor is in stark contrast to expectations of rising US interest rates
 
GBP
Cable traded lower overnight as the US Dollar was broadly stronger.  Yesterday, the British Pound started off soft as IPSOS Mori reported that 58% of business leaders said they had started to see the negative effects of the Brexit vote, but overall had a relatively quiet day & largely maintained strength. Sterling has slipped against the US Dollar om the overnight session on US Dollar strength combined with Brexit concerns heating up again. The main theme for the pound at the moment is, of course, the passage of the Brexit bill through Parliament, this is currently having a negative effect on the pound.

USD
The US dollar is slightly down against the majors this morning but up against the Canadian Loonie. We are still in the first month of Donald Trump’s presidency and he has been steadily working through rebalancing his trade agreements. At the end of last week, he turned his attention to halting and amending the Dodd-Frank regulation. If the regulation is repealed then this could well happen at a time when European banking is moving in the other direction to stiffer regulation, putting US banks in a prime position to make a clean sweep in the extremely lucrative global investment banking industry as well as increasing their ability to lend.

CAD
No major CAD news to report this morning, however, tomorrow we have trade balance and building permits expected to perform better than month’s previous which should give the Loonie a bit of an uptick against the USD. Interesting to note Bank of Canada Announces a Reduction to the Minimum Amount of Government of Canada Nominal Bonds it Acquires at Auction to 14 percent from the current 15 percent level, which came into effect last Friday.

GBP
Last week saw sterling strength early in the week as the market expected the Bank of England to warn of heightened inflation expectation levels. However, when the bank downgraded its inflation expectations this strength evaporated, and the weakness was exacerbated by weaker than expected Services PMI numbers. On the Brexit front, we had the introduction of the Brexit bill and white paper into parliament and the possibility of Article 50 being triggered on March 9th. This week sees BRC retail sales on Tuesday and parliament vote on the Brexit bill on Wednesday, with the release of goods trade balance on Friday. The weekend press outlined the prospect of the Lords making the Government miss its March 30 deadline, but the threat of retaliation by the Commons is considered too big to give this anything more than a 20% probability.
 
Euro
The Euro traded in recent ranges last week despite very pleasing CPI and GDP data showing the Euro zone economy growing. The political headlines are supporting the single currency as well with President Trump’s administration criticizing the Euro’s level as too low, and German Finance Minister Schaeuble saying that the Euro was too weak for Germany. The IMF still calculates where the German Deutschmark would be if it were still around, its latest calculation is for USDDEM to be 1.7200 rather than the Euro rate of 1.0700. On the Euro zone political front Marine Le Pen is making ground in the polls after France struggles to give her a presidential opponent with any decent credentials. That may well be changing with the emergence of Emmanuel Macron, although he will be pushed to make a political party in time for the May second round elections.

USD

The Dollar regained its higher position above the critical 1.30 level ahead of today’s highly anticipated US nonfarm payroll report. The release showed initial excitement as the number came in well above expectations with a 227K against 170K expected. This has been tempered however as wage growth was below expectations. Immediate reaction so far has been to see a weaker US dollar, but movement has been minor.

This coming Tuesday we finally have some key economic Canadian news with a projected trade balance of a projected 1.2B over a previous 0.5B. Big news from Toronto that we have come to consider as the norm is that new home listed dipped to 17.7 percent pushing up the average selling price to 22.3 percent.

GBP
Sterling spent the market positioning for a Governor with a tightening bias towards interest rates, but instead got one firmly sitting on the fence. Two-year inflation expectations were revised lower at 2.56% rather than the previous 2.70%, and three-year inflation expectations at 2.36% rather than 2.49%. The BoE continued by saying that they could cut the key interest rates if consumer spending is weaker than expected. For the sterling and interest rate bulls the BoE revised up its 2017 GDP forecast to 2.0% from 1.4%, a hefty jump. Carney did also comment that the biggest determinant of UK prosperity will be future relations with the EU. So all in all, as you were. The markets knee jerk reaction was to sell the sterling it had bought over the last 48 hours or so and now looks to today’s important US non-farm payrolls data. The Government released its Brexit white paper yesterday which will provide the guidelines for its departure negotiations with the EU. One of the aims will be the freest possible trade in financial services between the UK and EU members states, it will be very important to all concerned that this is a win-win situation for both the UK and EU.

Euro
Early London trading saw the ECB comment that “as expected, headline inflation has increased recently, largely due to energy, but underlying inflation pressures are subdued”. In this case the Euro was totally unmoved and spent the rest of the day in a tight trading range. On the political front Turkey voiced its displeasure at the approaches of Germany and Greece to Turkey, and commented that it would be forced to open the migrant floodgates if this didn’t change. ECB’s Coeure chimed in and added that it was inappropriate to withdraw stimulus while inflation relies on that stimulus. It is notable the some top tier investment banks are recommending sales of EURUSD at current levels In expectation of a retest of last year’s low.

USD

Federal reserve left rates unchanged as expected yesterday. Previously the Fed had penciled in three rate hikes this year so some economists were hoping for a hike as early as March, however the Fed’s release seemed less optimistic about these hikes then they had in December. This caused a US dollar sale and the dollar index has hit a two month low. This morning Unemployment Claims came in slightly better than expected (246K against 251 expected) and has done little to move the needle. Trump and his team continues to talk about a weak US dollar, and for now the market seems to be obliging them. This sentiment won’t last forever if strong numbers, or Fed rate hikes begin to occur, so while we’re likely to see a weak USD in the short term, there’s still risk for the market to go long USD in the next month or longer. Buyers should consider a forward contract to hedge some of their risk as we near the lowest we’ve seen since September.

GBP

The pound had been climbing on the back of a rumour that the BoE MPC vote would see four members voting for a rate hike immediately. However, this morning the Bank of England release seemed to show a raised forecast for growth and inflation, but voted 9-0 to keep interest rates unchanged, they also maintained a willingness to move policy in either direction. This has caused GBP to drop quickly this morning.

AUD

The AUD strengthened overnight after weak USD sentiments were followed by a record December trade surplus. Aussie Dollar is nearing 6 month highs against a number of currencies.

Happy Groundhog Day

USD

The US Dollar is trading mixed ahead of the Federal Reserve policy announcement, plus the extremely important policy statement, this afternoon @ 02:00 PM ET today.   Traders expect the Federal Reserve Bank to leave rates on hold after raising them in December, with promises of three rate hikes in 2017 overall, but will be paying careful attention to the FOMC statement for clues into future policy.  The US Dollar fell significantly yesterday across the board – and continued to do so versus Sterling,  EUR, Swiss, while recovering a bit versus CAD, NZD, JPY, and AUD - ahead of the FOMC today coupled with serious questions over the policy of President Donald Trump vis-à-vis recent immigration & travel orders.   Again, while the greenback did edge up versus the Commodity Currencies & JPY, and fell further versus EUR&GBP, overnight the US Currency is down across the board for the week.  This concern over Trump policy was highlighted when he fired acting Attorney General Sally Yates for refusing to enforce his travel ban, reflecting that he would aggressively act in line with his campaign promises. The new trade treaties have yet to come to fruition but Trump has managed to give the US Dollar its worst start in 8 years.  His stance in this weak US Dollar policy may receive pushback today with the FED meeting this afternoon.   All eyes on the FOMC decision coupled with the statement of Federal Reserve Chair Janet Yellen combined with President Trump policy on trade, immigration, and travel.  In Canada, we have RBC Manufacturing Data due which will be over showed by the US data and Fed meeting. No other major Canadian economic data due today.

EURO

The EURO has firmed considerably this week on a combination of greenback weakness combined with some better than anticipated Eurozone Economic Data as well.  Yesterday was a busy morning for the Euro as Flash CPI and GDP came in at +1.8% YoY and +0.5% q/q and both above estimates, indicating a Eurozone economy that is finally getting on its feet.   Everything is relative to expectation, but while these are positive releases for the Eurozone it does highlight a sort of growth ‘double standard’ for the Eurozone versus the United States & UK given their modest estimates. The single currency was further supported by slightly higher than expected Eurozone Final Manufacturing PMI this morning at 55,2 compared to 55.1 anticipated + previous.  The German & Italian figures were very near misses compared to consensus, while Spanish & French were both above expectation which made it perfectly clear how the overall figure was just a touch above target.   The market can now see disagreement between Germany who wants to start tapering the European Central Bank Quantitative Easing program, which the ECB insists will continue as projected.  The new US administration is certainly not shy and Peter Navarro, one of Trump’s trade advisors said that Germany was using a “grossly undervalued EURO,” which caused the Unified Currency to immediately jump higher pretty much across the board.   Germany runs a large trade surplus with the US and as such is being “called out” by the US, much like Mexico, China and Japan as the clear President Trump Administration pattern continues.   However, the Eurozone was defended by German Chancellor wannabe Schulz who said “There’s apparently a desire to split the European Union.  For us Germans, this means that the world’s biggest single market, in which we the world’s third biggest exporter, sell most of our products, is to be destroyed. That’s quite certainly not in Germany’s interest.”  Despite some political disagreements, Germany’s economic benefit from the Eurozone likely outweighs some rumblings + disagreements.

GBP

The British Pound has gained considerable steam since the UK Supreme Court last week did instruct the government that a vote of Parliament is required to trigger Article 50 to leave the European Union.  UK Prime Minister Theresa May did make a good point that it really would  highly questionable if UK Parliament did not abide by the express will of the British people, but the UK Supreme Court decision shows some judicial support of a ‘softer,’ if not ‘soft,’ Brexit process in leaving the European Union in the near future.  The Pound was assisted by on target Manufacturing PMI in the UK this morning combined with higher than expected UK  Nationwide HPI m/m as well.  Overall, UK economic data has been fairly solid in the wake of Brexit overall.  That said, yesterday Sterling lost nearly a cent in its pairing with the greenback in the morning and then climbing nearly two cents in the afternoon.  The fall yesterday morning was caused by a decrease in U.K. Consumer credit and also, more importantly, & disturbingly, by the news that overseas investors had been net sellers of U.K. Gilts.  This is a concern for the Bank of England & The UK Government going forward as the UK looks to fund its budget deficit.  The rise was caused by following EURUSD higher in the afternoon and was accompanied by The National Institute for Economic and Social Research estimated that a UK rate hike was likely in the middle of 2019 apparently. 

JPY

The yen is stronger on the week, but also shed some gains versus the US Dollar from yesterday.   Although this weaker US Dollar policy may suit Trump this will not apparently be an issue to others in G20 who all supposedly agree that currency manipulation is not to be entertained.  Overnight Japan’s Hamada, an advisor to Prime Minister Abe said that a US border tax would see the US Dollar appreciate and that trump’s arguments are destructive to Japan and the world economy.   This seems highly questionable as countries – especially Japan & China – have long seemed to push their currencies lower vis-à-vis the greenback given the trade advantage.  That said. Those countries also purchase a great deal of US Treasury Bonds so this trade aggression could potentially upset a delicate & important equilibrium.   Clearly, inflows into US Treasuries and security markets, in general, is very strong right now, but aggression toward these two very important trading partners could be damaging.   

USD

The US Dollar is trading mixed ahead of the Federal Reserve policy announcement, plus the extremely important policy statement, this afternoon @ 02:00 PM ET today.   Traders expect the Federal Reserve Bank to leave rates on hold after raising them in December, with promises of three rate hikes in 2017 overall, but will be paying careful attention to the FOMC statement for clues into future policy.  The US Dollar fell significantly yesterday across the board – and continued to do so versus Sterling,  EUR, Swiss, while recovering a bit versus CAD, NZD, JPY, and AUD - ahead of the FOMC today coupled with serious questions over the policy of President Donald Trump vis-à-vis recent immigration & travel orders.   Again, while the greenback did edge up versus the Commodity Currencies & JPY, and fell further versus EUR&GBP, overnight the US Currency is down across the board for the week.  This concern over Trump policy was highlighted when he fired acting Attorney General Sally Yates for refusing to enforce his travel ban, reflecting that he would aggressively act in line with his campaign promises. The new trade treaties have yet to come to fruition but Trump has managed to give the US Dollar its worst start in 8 years.  His stance in this weak US Dollar policy may receive pushback today with the FED meeting this afternoon.   All eyes on the FOMC decision coupled with the statement of Federal Reserve Chair Janet Yellen combined with President Trump policy on trade, immigration, and travel.  In Canada, we have RBC Manufacturing Data due which will be over showed by the US data and Fed meeting. No other major Canadian economic data due today.

EURO

The EURO has firmed considerably this week on a combination of greenback weakness combined with some better than anticipated Eurozone Economic Data as well.  Yesterday was a busy morning for the Euro as Flash CPI and GDP came in at +1.8% YoY and +0.5% q/q and both above estimates, indicating a Eurozone economy that is finally getting on its feet.   Everything is relative to expectation, but while these are positive releases for the Eurozone it does highlight a sort of growth ‘double standard’ for the Eurozone versus the United States & UK given their modest estimates. The single currency was further supported by slightly higher than expected Eurozone Final Manufacturing PMI this morning at 55,2 compared to 55.1 anticipated + previous.  The German & Italian figures were very near misses compared to consensus, while Spanish & French were both above expectation which made it perfectly clear how the overall figure was just a touch above target.   The market can now see disagreement between Germany who wants to start tapering the European Central Bank Quantitative Easing program, which the ECB insists will continue as projected.  The new US administration is certainly not shy and Peter Navarro, one of Trump’s trade advisors said that Germany was using a “grossly undervalued EURO,” which caused the Unified Currency to immediately jump higher pretty much across the board.   Germany runs a large trade surplus with the US and as such is being “called out” by the US, much like Mexico, China and Japan as the clear President Trump Administration pattern continues.   However, the Eurozone was defended by German Chancellor wannabe Schulz who said “There’s apparently a desire to split the European Union.  For us Germans, this means that the world’s biggest single market, in which we the world’s third biggest exporter, sell most of our products, is to be destroyed. That’s quite certainly not in Germany’s interest.”  Despite some political disagreements, Germany’s economic benefit from the Eurozone likely outweighs some rumblings + disagreements.

GBP

The British Pound has gained considerable steam since the UK Supreme Court last week did instruct the government that a vote of Parliament is required to trigger Article 50 to leave the European Union.  UK Prime Minister Theresa May did make a good point that it really would  highly questionable if UK Parliament did not abide by the express will of the British people, but the UK Supreme Court decision shows some judicial support of a ‘softer,’ if not ‘soft,’ Brexit process in leaving the European Union in the near future.  The Pound was assisted by on target Manufacturing PMI in the UK this morning combined with higher than expected UK  Nationwide HPI m/m as well.  Overall, UK economic data has been fairly solid in the wake of Brexit overall.  That said, yesterday Sterling lost nearly a cent in its pairing with the greenback in the morning and then climbing nearly two cents in the afternoon.  The fall yesterday morning was caused by a decrease in U.K. Consumer credit and also, more importantly, & disturbingly, by the news that overseas investors had been net sellers of U.K. Gilts.  This is a concern for the Bank of England & The UK Government going forward as the UK looks to fund its budget deficit.  The rise was caused by following EURUSD higher in the afternoon and was accompanied by The National Institute for Economic and Social Research estimated that a UK rate hike was likely in the middle of 2019 apparently. 

JPY

The yen is stronger on the week, but also shed some gains versus the US Dollar from yesterday.   Although this weaker US Dollar policy may suit Trump this will not apparently be an issue to others in G20 who all supposedly agree that currency manipulation is not to be entertained.  Overnight Japan’s Hamada, an advisor to Prime Minister Abe said that a US border tax would see the US Dollar appreciate and that trump’s arguments are destructive to Japan and the world economy.   This seems highly questionable as countries – especially Japan & China – have long seemed to push their currencies lower vis-à-vis the greenback given the trade advantage.  That said. Those countries also purchase a great deal of US Treasury Bonds so this trade aggression could potentially upset a delicate & important equilibrium.   Clearly, inflows into US Treasuries and security markets, in general, is very strong right now, but aggression toward these two very important trading partners could be damaging.   

USD
No major US data releases today, with the exception of consumer confidence releasing at 10:00. This likely won’t move the needle much as the dollar has been largely affected by political news lately. Speaking of which, more politically uncertainty overnight as Trump fired his Attorney General, Sally Yates, saying ‘she betrayed the Department of Justice’. She was replaced by Dana Boente after Yates refused to defend Trump’s immigration order. Trump is determined to continue on his protectionist policies and this includes stating that both the Yuan and Euro are undervalued. Trump has long been saying the US dollar is too strong, which should continue to push USD lower, however his protectionist policies look to strengthen USD. There are strong arguments to be made for upcoming dollar strength and weakness, and there is uncertainty in either direction. Think about locking in a forward or option contract to hedge some of your risk.

CAD
This morning Canadian GDP came out higher than expected at 0.4% over the 0.3% expected on the back of recovery in oil sands production as well as a rebound in manufacturing. We’re seeing CAD continue to strengthen this morning, though in large part that’s due to general USD weakness. Bank of Canada Governor Poloz will be speaking this afternoon at the University of Alberta. We don’t expect any policy announcements here, so this will likely not shift markets. That’s basically it for Canadian data this week, Canada will likely be moving largely based on reactions to US news for the remainder of the week.

EURO
The single currency had rallied overnight but was sold off during London trading time in what was seen as a “risk off” move. This sentiment combined with concerns over the Greek debt rescheduling talks with Germany’s Finance Minister Schaeuble, who commented that “time is running out”. Angela Merkel was among those criticising Donald Trump over his latest immigration policy. The Euro had a strange day, going higher against the US Dollar before falling hard and then rebounding on little news. We have ECB President Draghi talking this morning and the release of Eurozone CPI and GDP as well, so we have a chance for movement,

USD
US personal income came in slightly lower at 0.3% against 0.4% expected. The dollar ended last week on a weak note as GDP came in below expectations. Although aiming for three rate hikes this year, the Fed is still data dependent and last week’s data will not be pushing them to hike rates. In this case Wednesday’s FOMC decision should see no change in interest rates, but the following statement will again be important. Some gains were also held in check by Trump’s new immigration restrictions on traveler’s with passports from a set of Muslim countries, this has raised concerns about his administrations protectionist policies.

CAD
There’s been a number of good news releases for Canada last week, as the Keystone pipeline looks likely to be approved and Trump’s NAFTA renegotiation was said to not be targeting Canada. It looks to be a somewhat quiet week for CAD news, but Canada releases its monthly GDP report tomorrow, which will be worth keeping an eye on.

EURO
After steady gains this week the Euro fell quickly this morning after senior European central bank official, Ewald Nowotny, said it will probably review its policy stance in June, but likely not wind down any stimulus. The Euro was out of the spotlight last week, this week will see ECB president Draghi speaking on Tuesday along with EU inflation data, and first estimate Q4 GDP due for release the same day as well. Eurozone Services PMI and retail sales are due out of Friday. The market will start to look towards the Dutch elections shortly, the current theme being peddled is that the election may see the most votes for the right wing anti EU Freedom Party but no chance of actually being able to form a Government.

USD
The US dollar is up against most of its rivals. That said, the Commodity Currencies (CAD, AUD) are largely sideways as oil has ticked up with the exception of the lower Mexican Peso on news that President Donald Trump plans to pay for the wall on the Southern United States border with a 20% tax on Mexican Imports.  The big economic data release today is US Advance GDP q/q which will be seen as one of the indicators for the Federal reserve, and their rate hikes this year.  The market will look towards the meeting between President Donald Trump and Prime Minister Theresa May for Cable direction.  While the US Dollar has been less buoyant the last few weeks, it is important to remember that, form a fundamental level, expected Federal Reserve Bank rate increases continue to support the US Dollar in the face of uncertainty elsewhere with Brexit coming up in the UK & continued downside risk to the struggling Eurozone Economy.
 
EURO
Italian Constitutional Court yesterday delivered a ruling which harmonizes the electoral procedure between the Upper and Lower houses of the Italian parliament, effectively introduced a new voting system for Italy.  The major Italian parties are now calling for elections this year as the new system will more likely lead to a coalition Government, thus keeping anti-euro party 5 Star Movement out of power.  The Euro Finally had some movement as it slipped lower against the US Dollar on the back of Firmer US interest rates.  EURO weakness could also possibly be attributed to European Union Commissioner Pierre Moscovici who announced that a financial or “Tobin” tax for some EU states was “within reach.”  On one hand, the European Union is encouraging London’s financial services to leave the City and set up in Frankfurt, Paris or Dublin etc.  On the other hand, it is going to slap a transactional tax on every financial trade struck.  When you consider that the EU has restrictive employment laws and higher tax rates than the UK they are making the UK look more attractive despite Brexit.  Downside pressure on the Eurozone Economy remains an overlying issue for the single currency in its pairing with the US Dollar as well given the relatively strong US Economy.
 
GBP
The British Pound weakened in its pairing with the US Dollar overnight after strengthening all week largely as a result of the UK Supreme Court key decision that the government will need the support of Parliament to trigger Article 50 & push forward with Brexit in March.  Yesterday UK Prelim GDP was a very pleasing +0.6%, 0.10% above expectation + previous release increased to 0.7% from 0.5%,  and produced an annual growth figure of 2.2%, which keeps the UK economy at the top of the G7 growth leader board.  The Office for National Statistics also commented that consumer spending supported Q4 services growth and manufacturing also rebounded from a weak Q3 reading. GBPEUR hit a new three-week high but it was interesting to note that Cable actually slipped back on this release.   It may have been market positioning or possibly the news that UK CBI retail sales balance at -8 in January versus December’s +35, with grocery sales volumes falling at the fastest pace since August 2004. When the Government proposed the Article 50 Bill it was a short and succinct one as expected with the market trying to gauge whether amendments to the bill could delay the triggering of Article 50, also keen to see the White Paper on Brexit that has been promised to parliament which will actually outline the Governments Brexit plan.

USD
The US dollar hit a seven-week low against the majors with Japanese trade data strong and European corporate results excellent, the Dow Jones traded above the psychologically important 20K level yesterday but failed to drag the US Dollar higher with it. The new US administration is not afraid of giving its view with Ted Malloch, who is expected to be the US Ambassador, to the EU warning that the Euro could collapse within 18 months. He said “the one thing I would do in 2017 is short the Euro. I think it is a currency that is not only in demise but has a real problem and could in fact collapse in the coming year, year and a half.” We have US Flash services PMI for release later today.

CAD
As Canada is mostly a commodity currency heavily waited on oil it might be interesting to note that one of China’s largest energy companies PetroChina warned that their profits for 2016 were to drop 70% to 80%, due to lower international oil prices and domestic natural gas Prices dropping “drastically” compared to the previous year, this caused weakness in the Chinese currency. Trading overnight was thin as Australia had a bank holiday. No major Canadian news due today.

GBP
Stop loss buying helped Sterling push higher again as the market digests the Supreme Court decision. UK Prime Minister May announced plans to release the Government’s Brexit plan in a white paper to parliament after pressure from MP’s, this was enough to keep sterling pushing higher. On the economic front, we have the release of preliminary GDP today, this will be keenly watched to see if the UK can continue to provide G7 with its highest growth rate. Theresa May meets with Donald Trump on Friday with some analysts seeing this as a reason for sterling strength.
 
Euro
German IFO business reading was softer than expected at 109.8, but the Euro was largely undisturbed and stayed trading in recent ranges. The city of Frankfurt invited some 20 banks to visit them to discuss relocating after Brexit, it would seem like Euro clearing may well move to Europe from London after Brexit. One of the event risks is the French election where Marine Le Pen is committed to scrapping the Euro. Her most likely opponent is Francois Fillon and it was reported yesterday that his wife has claimed some €500k in wages as his parliamentary aide- but never worked. The election result depends on the depth of feeling for change that the French electorate has, this news won't help the establishment cause.

USD
The US dollar to Canadian Loonie fell considerably in value yesterday trading, currently at last Wednesday’s levels. This move was attributed to the new US President as he signed off plans for the Keystone XL and Dakota access oil pipelines. These companies will be able to re-enter bids, with the government requiring the pipe itself to be built in the USA. Trump owned shares for a number of companies related to these pipelines, and may still. The US Dollar against the majors strengthened during the afternoon. On the question of China, Trump has been urged to label China a currency manipulator by Democrat Senator Schumer but as yet hasn't followed this route. On the immigration front, he has announced via tweets plans for a wall with Mexico and is also mulling restricting immigration from terror prone countries. The FX markets are still deciding what his plans for the economy actually mean, but the equity Markets like what they hear and the S&P and Nasdaq made new all-time highs yesterday. US interest rates are pushing higher as well and if this continues we could see a higher Dollar again. A rather large USD/CAD option ($1.4B) comes due at 1.3185 at 10 am which is a bit of a stretch giving the currency value may indicate an early run in USD. Again no major Canadian economic news, however, there will be further traded discussions as the Trump seems bent on renegotiating of these deals
 
GBP
It was all about the pound again yesterday as the UK Supreme Court ruled that Parliamentary approval is needed to trigger Article 50. However, there wasn’t really a push higher because the market had positioned itself long of sterling before the verdict, the Supreme Court ruled that National Assemblies (Scotland, Wales, and N. Ireland) did not need to be consulted on the process. This meant that delaying tactics and indeed input from Scotland’s First Minister Nicola Sturgeon will not need to be entertained (even though she has promised to put 50 amendments forward to any bill tabled) in the triggering of Article 50. Opposition leader Corbyn commented that he would not seek to delay triggering Article 50, and as such, the question of when the clock starts clicking on the UK’s departure from the EU is all but settled. The FT has calculated that parliament will give its consent to the triggering of Article 50 by March 13th, giving enough time for the Government to meet its deadline.
 
Euro
The Eurozone Flash Services PMI’s at 53.6 were very slightly below last month’s 53.7 and showing continued expansion. However, the Euro slipped against the US Dollar as US yields firmed up, although US home sales slightly disappointed and kept the Euro within recent ranges. Interestingly, ECB executive board member Lautenschleuger said that the Euro was not in danger and will not fail but needs structural reform for growth. She was also on the wires overnight as she called for a discussion over exiting the ECB’s stimulus package to start soon.
 

USD
US Dollar is relatively unchanged from yesterdays trading levels. Yesterday analysts had been critical of Trump's lack of planning for tax cuts and were confused over his border tax plans. He promptly said that companies that move abroad to sell products back into the US will face a major tax on products coming back into their home country and that he is going to cut taxes massively for the middle class and companies. He also commented that China and Japan make it difficult for the US to sell products into those home countries, he signed an executive action to withdraw the US from the Trans-Pacific Partnership deal. Although the market appreciated his clarity it does have concerns over his protectionist trade plans, this has seen a softening of US Equity markets and the US Dollar. No major Canadian news today.
 
GBP
The pound managed to hold its ground as the Dollar was soft due to disappointment on President Trump’s continued focus on global trade and before today’s important Supreme Court decision. Reuters reported that UK banks were the least optimistic since the Brexit referendum but this couldn’t knock the pound lower. Overnight GBPUSD again pushed higher to make a new one-month high. The real short-term direction for the pound will come from this morning’s Supreme Court judgment, it may well be prudent to note that the Government is rumored to already have a strategy in place to enable it to trigger Article 50 by the end of March. Whatever the Court’s decision it could be an interesting morning.
 
Euro
Managed to stay firm and was helped by US Dollar weakness rather than positive Euro sentiment. This buoyancy continued overnight as it was pushed higher by negative US Dollar sentiment, and the unwinding of Trump trades as the President focuses on the NAFTA agreement (a new deal will possibly exclude Mexico altogether) and changing trade relationships with China and possibly Japan. This leaves the Euro the beneficiary and it is happy to get some relief before the first European general election in March takes place in the Netherlands. Early German Flash Services PMI have disappointed, coming in at 53.2 and the lowest reading since October last year.

USD
Last week it was reported that Trump pushed back against the republican plan to tax imports and exempt exports. Later when it was made clear to him that he needs this additional new tax revenue to offset his tax reduction plans in other areas, he said he would certainly consider it over the next 6 weeks. During his time as president-elect, the market pushed the US Dollar and US stock markets higher in expectation of huge stimulus for the economy. In conjunction with this, the Fed has hiked US rates and is looking to hike them another 3 times this year. However, with a new president lacking any previous experience of office and still tweeting as much as possible, we may well get a volatile and difficult to gauge the market for a fair while. This week sees an array of corporate earnings whilst we wait until Friday for the release of advance GDP which may provide the impetus.

CAD
Apart from the Loonie, the commodity currencies fared quite well last week, but now that president Trump is here and already directing comments at China this could have a negative effect on world trade and see this peer group falter. The Yen has gained sharply overnight as an illustration of the concerns it has over how Trump’s presidency will actually pan out and Australia has a national holiday on Wednesday after the release of CPI.

GBP
Last week saw a classic short squeeze for sterling as UK PM May spelled out that a “hard Brexit” is probably on the cards. When you consider that the EU cannot afford to let the UK depart from the EU on terms that are perceived as better than those it enjoyed as a member, you can begin to realize how difficult the negotiations are going to be. Looking forward to this week the big day is, of course, Tuesday when the Supreme Court will give its verdict on the Governments appeal to triggering article 50. If, as expected the Government loses the case there could be a short-term rally in the pound, but Theresa May has already stated that she will trigger Article 50 by the end of March this year so to achieve this. It is understood that a very specific bill will be introduced on Wednesday. The bill is expected to pass quickly and enable the Government to achieve its goal, in this case, any bounce in the pound may well be short-lived. Thursday sees the release of preliminary GDP and could give us direction for the end of the week.

Euro
The ECB President Draghi was dovish last week in his thoughts for European interest rates, the spotlight is not on the single currency at the moment. Tuesday could be interesting as the Italian Court will deliver its verdict on election rules and force Italy to hold an election this year. In early Asian trading, the Euro has pushed higher on US Dollar weakness, as the market loses patience with the new US administration over tax cuts and infrastructure spending plans. Although early days, the incoming President has focused on the renegotiation and cancellation of trade treaties NAFTA (North American Free Trade Agreement) and TPP (Trans-Pacific Partnership) respectively, which leaves the market vulnerable to USD weakness. German IFO data will be of interest on the economic front.

USD

The US Dollar is down against the majors but us Canadians have seen an almost 100 point gain in USD over CAD. Overnight comments from Fed Chair Yellen were construed as slightly less hawkish than her recent utterings and the USD slipped a little overnight. Today's the day we see President Trump inaugurated, some analysts suspect his “honeymoon period” with the voters has already ended as his approval rating is already around the 40% level and there are anti Trump protests arranged for today as well. The market will review his speech (supposed to be a short one) for clues to his plans for the future and it is expected that he will talk about jobs and the economy. BlackRocks CEO is not alone in his thought that Trump and the Fed’s might be at odds over the weakling or strengthen of USD dollar.  

CAD

The CAD has been soft as the thought of NAFTA renegotiations start to take centre stage, whilst the AUD has been remarkably resilient in the face of lower commodity prices. The Yen managed to gain some ground back with a weaker dollar and overnight Chinese GDP came in at 6.8% and in line with its broad 6.5%-7% range.

GBP

Yesterday saw a carrot and stick strategy from the UK Prime Minister May and Chancellor Hammond. May said that she wanted a bold and ambitious agreement between the UK and EU and Hammond said that the UK would find a way to compete if it didn't get a deal. It was interesting to note that German Finance Minister Schaeuble an elected politician of an EU member state said that he will do his best to make the relationship between the EU and Britain as close as possible. On the other hand Eurogroup President Dijsselbloem said that the UK will be totally outdated and impoverished with massive unemployment in 20 years’ time. The UK shopper will have a chance to show their view on Brexit this morning at 9:30 when UK retail sales data is released.

Euro

As expected the ECB didn’t change interest rates or its QE policy but at his press conference Draghi said that he was still concerned about providing support to the European economy as “underlying price pressures remain subdued”. He also saw no convincing upward trend in underlying inflation (the recent rise in headline inflation to 1.1% is mainly down to the oil price rise), and these overtly dovish comments helped to weaken the Euro initially before it bounced back later in the day.

USD

The Dollar had a better day yesterday as it gained back recent lost ground, which was encouraged by Fed Chair Yellen as she said that to leave hiking rates too long could force aggressive action and possibly push the economy into recession. She continued that growing divergences in US global rates is putting upward pressure on the US Dollar. Despite that there is a growing expectation that Trump might try to push USD lower to stimulate exports as a way to attack the Chinese manufacturing industry. With Trump’s inauguration tomorrow long and mid-term risk continue to rise.

This morning saw the release of positive unemployment claims and Philly Fed Manufacturing numbers from the US. Both numbers should help the US continue its recent positive streak and solidify any gains from yesterday.

CAD
The BoC held rates firm but the Canadian Dollar slipped after reports that a rate cut for Canada was still on the table. Combined with oil pushing lower and concerns over NAFTA agreement now that Trump was so close to his inauguration caused CAD to fall from the highs it had reached. This morning Manufacturing Sales came in well above expectations for Canada coming in at 1.5% increase over 0.2% expected. The data was overshadowed by the US numbers, and CAD continues to weaken against USD.

GBP
GBPUSD slipped lower despite average earnings coming in at 2.8% and the claimant count falling by 10k but much better than the 4.6k increases analyst expected. It could well have been unsettled by the HSBC CEO saying that he will move around 20% of UK markets revenue to Paris. Of course the markets are very aware of banking’s importance to the UK economy, and overnight Goldman Sachs announced it could reduce its staff by 50%. This is not good news for the city and will encourage fears over the effects of Brexit.

USD

The US dollar is up against the majors this morning. If the days before the Presidential inauguration are anything to go by, FX participants will be hanging on every utterance that Donald Trump makes. The latest news was specifically that Donald Trump said that the US Dollar was too strong. His comment was pointed at the Chinese Yuan but its effect was across the board as the US Dollar slumped. Trump also commented that the Republican “border adjustment” plan was too complicated. This was a plan that would have taxed imports and exempted exports and economists had argued that this tax would spur an automatic 20%-25% increase in the US Dollar. Now that this idea is being rejected by Trump the Dollar has lost its shine, at least in the short term. We have US CPI for release later this afternoon UK time.

CAD

Big news for Canada this morning will, of course, be BOC Monetary policy statement along with whether or not the BOC will raise or lower interest rates. As we have a new US president about to take office I believe they will maintain the rate at 0.50%. That being said the policy statement to follow might hint at when the next hike might come due as the CMMC has already said they will be increasing insurance premiums in March to help curb the housing market perhaps to the BOC will need to hike to continue to curb. The AUD and CAD have been strengthening nicely against the Us Dollar in recent trading and both have important events coming up.

GBP
UK CPI came in at 1.6% and allowed the GBPUSD market to squeeze higher before UK PM May spoke. It was given a hand by Donald Trumps’ weak US Dollar comment but didn’t need much encouragement as the market had sold sterling before May’s speech. The pound was helped higher as she advised that parliament would vote on the final agreement to leave the EU. As May continued it became evident that there would be at least one adult in the negotiation team for the UK, she stressed that although the UK was leaving the EU it was not leaving Europe and would seek a clean Brexit whilst maintaining important security and other responsibilities. She also stressed that the United Kingdom was a priority and would consider plans from the Scottish, Welsh and Northern Irish parliaments on the path of Brexit. (These last comments didn’t appease Scotland’s First Minister Sturgeon who said that a new referendum was now all but inevitable after Theresa May had rejected her Brexit demands). Overall, the market appreciated the clarity of the message which helped the pound across the board, we are going to have a “hard Brexit” with possibly a period of implementation rather than a long-term transitional period. By the end of UK trading, GBPUSD had gained 2.7% on this May/Trump/clarity combination, confirming that the market was short pounds and had to buy them back in a hurry yesterday. However, the medium-term trend lower is still in force. We have average earnings data today and a strong figure could see more buying of sterling.

Euro
German ZEW economic sentiment at 16.6 was a nice improvement on last month’s 13.8 but lower than the expected 18.9. The Euro, however, managed to cling onto sterling’s coat tails and strengthen against the US Dollar. We do have the EU final reading CPI today for direction, but be aware that the single currency is being pushed by other currencies at the moment.

USD

The US dollar is testing the 1.30 mark which could signal a weaker USD over CAD going forward, or this might be a short-lived buying opportunity. We will most likely have to wait even past the inauguration of Trump to have a better grasp of the direction. Despite the US holiday President-elect Trump managed to offend NATO members by commenting that the organization was obsolete, with this comment getting a response from Germany’s foreign minister Frank-Walter Steinmeier that his comments “were not helpful”. Trump also managed to threaten BMW with a 35% tax on any vehicle that is built in Mexico and exported to the US. BMW’s response was to point out that their US plants actually are a net exporter of vehicles from the US. Trump’s recent actions point to a style of Presidency that is at times micromanaging and in danger of missing the big picture for the US economy of tax cuts and infrastructure stimulus. The World Economic Forum continues day two in Davos it will be interesting what the leaders from over 90 countries thoughts are towards the new US president-elect, especially around trade. No major Canadian news out for today waiting for the BOC policy and rate statement due tomorrow morning.

GBP

The newswires again were reporting that UK PM May’s upcoming Lancaster House speech this morning was to be along the lines of a “hard Brexit” as well as estimating that next Monday, Jan 23rd, would see the Supreme Court ruling on Article 50. This news is not supportive for sterling and as such the pound stayed at lower levels. Lawyers Baker McKenzie added to the negative sentiment by saying that UK M&A activity was to drop sharply in 2017, as investors await Brexit clarity. Overnight trading, however, saw GBPUSD push higher on technical trading before UK PM Theresa May's speech today that is expected to outline a clean break from the EU. This will apparently entail red lines of immigration controls and supplanting the European Court of Justice with the UK Supreme Court, which means that the UK has no access to the single market and no membership of the customs union. This will probably encourage sterling weakness again although any mention of a transition period could make the bearish sentiment less so. The release of UK CPI this morning could make things more Interesting as overnight the BOE Governor Carney said that higher inflation would be looked through within limits. Quote of the session came from Carney again who when asked about sterling said: “sometimes it moves up and down”.

Euro

Was quiet again in US holiday affected trading although it managed to hold onto most of its gains against the pound. Overnight with lower US yields the Euro managed to creep higher during the session.

USD

The US dollar has seen little movement since last Thursday, however, even though we start the trading week off with a bank holiday we have a tremendous amount of news and meeting scheduled throughout this week. Over the course of this week, we have five FED ministers set to speak about the economy including current Treasury Sec Lew to speak on tax reform, trade and the economy dealing with China. All very interesting as this Friday sees the inauguration of Donald Trump as President of the United States. We could see some wild swings with the greenback which is something we may have to get used to as Trump has no plans of curbing his twittering. Trump called NATO ‘obsolete’ this weekend, which worried some in Europe and raises fears of a split across the Atlantic. The mutual defence treaty has been around for 68 years requires, among other things, for member states to come to each other’s aid in case of an attack and is seen as a deterrent to Russian aggression. The article requiring mutual defence has only been used once, after the September 11th attacks.

CAD

The currencies benefitting from the above noted US Dollar weakness have been mainly the AUD, CAD, and Yen. The main economic event for the Australian economy is the employment change due out Wednesday local time/very early Thursday morning UK time. We also have the release of Chinese GDP and Industrial production data Friday morning for direction and this data could set the tone for the next week or so. The Bank of Canada also sets interest rates this Wednesday afternoon.

GBP

Last week saw GBPEUR break through important support levels as reality begins to seep in that regardless of the Supreme Court judgment due on either 18th or 23rd Jan, the UK will probably have to trade on World Trade Organisation (WTO) rules after leaving the EU. The logic is as follows: the UK wants to make its own trade treaties, hence it must leave the customs union. Theresa may have said that as the UK electorate voted to leave the EU we are leaving the EU, and hence the Single market. Therefore, the only alternative is to trade under WTO rules or under a completely new agreement titled “rabbit out of the hat.” In this case, the probabilities of a transition period for the UK between leaving the EU and trading under WTO rules are growing substantially.

UK Prime Minister May will give the “Lancaster House” speech tomorrow to outline the Governments approach, as the above logic is now apparent to the market GBPUSD has dropped some 1.6% from the New York close to the Asian low, the market is now testing important support levels in a similar fashion to GBPEUR last week. Whilst some commentators can envisage a bounce for GBPUSD after tomorrow’s speech, a close below technical support has a high probability of seeing another leg lower for the Pound as we retest levels not seen since last October 7th flash crash. UK CPI is released tomorrow and average earnings on Wednesday will complete the picture.

Euro

The Euro started last week soft but finished on a firmer note as the market considered what the latest jump in European inflation actually means for the Single currency. The inflation rise was accompanied by calls from non-other than German Finance Minister Schaeuble for higher European interest rates. The main events for Europe are the final reading of CPI on Wednesday and the ECB interest rate meeting on Thursday followed by President Draghi’s press conference, but the euro may well be driven by other currencies themes than under its own steam this week.

USD
Retail Sales this morning and PPI numbers are due out at 8:30 today. The US has been steadily falling and this will be a chance to help right the ship a little. So far this week Trump has been the main driver for US stocks to fall again (NASDAQ -1.1& S&P -0.8 Dow Jones -0.9), with the Dollar losing ground against major peers. FED’s James Bullard commented that the tighter trade policies that were part of the Trump campaign could pose downside risk for US economy, meaning change in trade policies which could result in new taxes for consumers and companies, thus disrupting supply chains making goods more expensive. Janet Yellen spoke to educators in the evening and gave no comments on Interest Rates, when asked on economy outlook she replied “economy is doing quite well but there are serious problems long-term.”

CAD
USDCAD is at a crossroads currently, with good arguments for both strength and weakness in the coming weeks. It’s important to be prepared for a shift in either direction and if the market gets to a place where the rate is favourable, consider locking in a forward contract to hedge some of the future risk. In the short term a continuing oil rally has helped Canada, but the majority of its strength has come from a continued weakening US sentiment. Given the close ties between the countries a weak US will generally weaken CAD overall and the protectionist policies of Trump continue to be a concern for Canada moving forward. Next week is busier for Canada on the news front with an Bank of Canada rate statement on Wednesday.

Euro
Took advantage of poor US sentiment and hit yearly highs of 1.0682 against the greenback. No major data released to hold the morning rally and was quiet in the afternoon. Attention switched back to Brexit and finally some movement on how the UK will position their exit, this sent GBPEUR down to 1.1427 testing key support levels. The ECB meets next week for an Interest rate decision but all eyes will be on the Supreme Court and Theresa May ahead of triggering article 50.

USD
The US dollar was down across the board as investors are worried about how trade deals will look when Trump takes office along with how Trump’s promise to boost fiscal spending while simultaneously cutting taxes will affect the economy. With Trump's market uncertainty along with the FEDs expectation to raise interest rate three times this year (data depended on) leads us to crossroads. We can either expect a rather high US over CAD or much lower, in either case, the direction will come with little notice. Great time to discuss your options with your trader to see how to appropriately hedge your risk.

CAD
The Canadian Loonie briefly hit a three-month high over Trump's remarks only to rebound back to mid-December levels. Canadian new home price index came in at 0.2% over an expected 0.3%, worth nothing that Decembers came in at 0.4% which could indicate a cooling  Canadian housing market.

GBP
Dipped to a 31 year low (excluding recent flash crash) to 1.2033 on the back of trade deficit figures widening to -£12.2bn. Positive manufacturing data attempted to recoup some of the losses but comments made by BoE Kashyap stating; “My biggest concern is that Brexit will be a leap with no certainty on how it will go" (Reuters) pushed Sterling lower. This comment, however, was balanced by Mark Carney telling MPs that the recent slew of solid economic data had made it likely that the Bank of England would raise its forecast for UK growth, the second time since the referendum. He also claimed that Europe’s dependence on London for finance services put it at greater risk of a banking crash, and an economic slowdown than the UK in the event of a hard Brexit with no transition arrangements. Taking a tough line with Brussels, which wants to use transition talks as a bargaining chip, Mr. Carney said: “I think that the financial stability risks around that process are greater on the Continent than they are for the UK.”. The Pound’s recovery continued through the evening following the rather unusual Trump conference, whereby the President Elect attacked US secret service and pharmaceutical firms showing little composure under pressure. We saw GBPUSD touch 1.2272.

Euro
Very quiet for GBPEUR yesterday, manufacturing data kept GBP range bound for the short-term with nothing positive in Europe to drive the EUR. Risk certainly looks to be on the downside with the Cabinet privately accepting they are likely to concede the Brexit Supreme Court judgment, and have requested some insight so they can prepare a bill for May to deliver. Carney also warned Brussels that the UK leaving the Single Market would prove costly and potentially a higher risk for Europe, but we saw little reaction from the market. Worth noting the FTSE continued the run and reached a 12-day winning streak – weak pound responsible for heavy investment into UK stocks.
 

USD

The US Dollar is trading broadly higher this morning.  Germany’s FDI said that US protectionism could hurt German growth, whilst in contrast, the US small business confidence soared to a 12 year high of 105.80. This, along with President-elect Donald Trump’s press conference due at 11:00 AM ET today, saw US Dollar buying overnight.  Indeed, the greenback was higher versus Sterling despite better than expected UK Manufacturing Production overnight.  This figure came in at +1.3% compared to consensus of +0.6%, and a previous number which was revised just a touchdown by -0.1% to -1.0% in the overnight session. The market will use Trump’s conference to decide whether to continue pushing the US Dollar higher on the back of stimulus plans for US growth and manufacturing, or whether the ‘Trump Jump’ is now over and it should prepare for a dose of reality with the real possibility of a trade war between US and China.  Once again, MXN has fallen to record lows given Donald Trump’s anti-NAFTA rhetoric.  The Commodity group was down overall as Brent Crude Oil fell yet again on doubts that member nations will abide by the OPEC production cut – largely as a result of rumors that Iraq is breaking its promise to abide by the agreement - combined with fears over decreased global demand.

GBP

Cable is trading down on US Dollar strength coupled with continued fears of a ‘hard’ Brexit rather than a ‘soft’ one.  The Pound was generally weak to start the overnight session on a break of technical support from GBPEUR and also on yesterday’s news that French Industrial Production MoM had jumped up to 2.2%, which is the highest since June 2013.   Boris Johnson, the UK Foreign Secretary, has had some success in his latest visit to the US after Senate foreign relations committee chairman Bob Corker, said that the UK will be in the “front seat” to negotiate a new trade deal with the incoming Trump administration.  This could possibly be the reason why the FTSE 100 hit a record high yesterday for the 9th consecutive day, beating the longest previous streak being eight consecutive highs back in 1977.  Labor leader Jeremy Corbyn called for a wage cap, this will only push him and the Labor party further away from power.  With March approaching, Sterling is likely to continue to be volatile as market participants feel out how Brexit will exactly unfold. 

EUR

Euro is trading lower in its pairing with the US Dollar given both US Dollar buying, and disconcerting comments from Germany’s AFD party that the Eurozone should be split into two, with a strong cluster of nations centered around Germany and the weaker nations leaving the Euro.  Positive economic data helped the Euro in early London trading hours yesterday, although the World Bank also cautioned that Brexit could drag down growth prospects across Europe so the single currency adopted a softer tone later in the day.

Commodity Currencies (AUD, CAD, MXN, NZD, ZAR, ET AL)

The Commodity Currencies – CAD, MXN, and ZAR in particular - slipped along with oil as rumors of Iraq breaking its OPEC production cut promises hit the newswires.  MXN hit record lows in this pairing with the greenback as the market waits for President-elect Donald Trump’s press conference at 11:00 AM ET today in light of his anti-NAFTA rhetoric.  Indeed, the recent development of Ford not going forward with plans for a large Mexican plant reflect potential uncertainty & pressure on the Mexican economy.  The significant recent rise in MXNUSD led the Mexican Central Bank to recently buy US Dollars to stem the tide, which reflects significant concern over the Peso’s fall.    AUD & NZD traded up earlier in the session but have ended up sideways after US Dollar buying overnight.

USD
Markets were quiet yesterday with no major releases coming out, this continues today with no major news set to come out. The market looks like it may be waiting for Trump’s press conference tomorrow before moving significantly. There is some concern this press conference could include aggressive details on trade policy which could impact the currency.

CAD
The Canadian dollar stayed steady with a lack of news essentially all week. As usual CAD will take a back seat to the US dollar and any major shifts to come from news there. Expect this week’s CAD section to be short barring any unexpected news.

GBP
When Theresa May said over the weekend that the UK should stop thinking in terms of what part of the EU it wanted to keep the market took her comments as evidence of a preference for a hard Brexit. Yesterday afternoon Angela Merkel the German Chancellor repeated her mantra that there would be no cherry picking for the UK in its relationship with the EU confirming the EU’s hard line stance on Brexit. Neither comments argue for a higher sterling and GBPUSD hit a 10 week low and GBPEUR neared support with the FTSE 100 making a new high seemingly oblivious of the whole Brexit affair. Overnight the UK British Retail Consortium reported a December rise in like for like sales of 1.0%, a healthy rise but countered by slow bigger ticket item sales.

USD
The first week of the New Year saw the US Dollar run into profit-taking sellers. President-elect Trump tweeted at almost any and all car manufacturers daring to consider building a plant in Mexico, and a non-farm payrolls number that missed the headline figure but still attracted Dollar strength as the average hourly wage earnings grew to 2.9% YoY. All in all encouraging the market to think that the Fed may well have to raise rates three times this year. This week sees US banking stocks quarterly results which could be influential on the US Dollar value. There's been a correlation recently between US stocks and the US$, both strengthening in tandem with each other. This has left the Dow Jones poised to break through the psychologically important 20k mark, and if the results from US banks are good then the Dollar could be poised to strengthen again. President-elect Trump has his first press conference on Wednesday and given his track record that could well be an interesting one.

CAD
The Canadian data was positive as well last Friday with 53.7k jobs added to the economy last month and nicely above expectations of a drop of 5.1k. BOC business outlook survey is due out this morning at 10 am as this outlook is coming out before an interest rate decision it will be important to look into key phases used.

GBP
The Pound had a generally positive week last week as the economic data was pleasing. Household borrowing grew at the fastest annual rate for more than 11 years as positive sentiment was maintained in the U.K. economy. UK PMI data readings were all above expectations and the pound managed to gain a touch on the week against the Dollar, before the US Non-farm payrolls data on Friday afternoon pushed GBPUSD lower. UK Prime Minister Theresa May will today outline her vision for a shared society, but the market will really be looking forward to her speech next week (Tuesday) on her plans for Brexit. The market will look to the UK manufacturing production and trade balance on Wednesday for the direction this week.

Euro
Last week saw positive Eurozone data with CPI (consumer price index) pushing higher to 1.1%. and Although Eurozone retail sales MoM fell -0.4%, the European Commission’s monthly survey of economic sentiment in the 19 countries sharing the euro rose for the fourth month in December to 107.8, apparently boosted by rising optimism in France, Germany and the Netherlands. As a figure of 106.8 was expected and well above the long-term average reading of 100, the data was certainly positive. The main economic data point from the Eurozone this week will be last month’s ECB monetary policy meeting accounts.

CAD
Canadian dollar has stayed near a three-week high ahead of major news releases for Canada and US. At 8:30 Canada has Employment Change and Trade Balance numbers due out. Employment is expected to shrink by 5.1K with an uptick to a 6.9% Unemployment Rate. The Trade Balance is projected to worsen to -1.6B from -1.1B the month previous. Both are obviously bad numbers for Canada, but have been largely priced in. An unexpectedly strong number could help solidify Canada’s recent gains and push CAD closer to 1.30. The mix of CAD and USD numbers today have a potential for market movement in either direction, so be prepared for a swing.

USD
The major currencies had one eye on the emerging markets movements as the Chinese Yuan (CNH) strengthened quickly against the US Dollar, and Banco de Mexico intervened in the market to sell US Dollars for Mexican Peso’s. The market also started to have doubts about Donald Trump’s economic plans, wondering how good for the economy they really will be and with the ADP jobs data only showing an increase of 153k jobs over Christmas, rather than the expected 171k the US Dollar was quickly sold in the afternoon. Given the official Non-Farm release is at 8:30 this morning we’ll see how well the numbers align and if there’s any correction. Between that and Average Hourly Earnings being released this morning, the market will have a chance to move in either direction.

CAD
After gaining early yesterday against most currencies, CAD leveled out and is maintaining its strength so far in early trading. CAD is now at close to a three-week high, largely on positive economic news around the world that is helping to strengthen commodity backed currencies. It’s a good time for buyer’s as news employment news tomorrow have the chance to pull the currency in either direction. Be prepared to act quickly as markets are still thin this week which can lead to overreactions on market news. Crude oil inventories for the US also releases at 11:00 today which can impact oil prices. Solid Unemployment Claims numbers from the US today may result in a strengthening of USD.

USD
Was soft most of the day as it suffered from profit taking before the FOMC meeting minutes later in the day. When the minutes were released they suggested that if they do see huge stimulus from the incoming administration it has room to hike rates sooner than currently planned. The market has been buying Dollars for some time now and last night the market decided to take some profits. We may see a market correction next week as more investors return from vacation.

Employment data comes out tomorrow for the US, but today the ADP Non-Farm numbers are released and showed a slight miss of 153K against the 171 expected. However, Unemployment Claims came in better than expected with 235K against 262K expected. Right now these numbers are largely balancing each other out, but we’ll know better once the Non-Farm number is released officially tomorrow. We still have ISM Non-Manufacturing due out today at 10:00.

EUR
After stronger inflation data for Germany yesterday we had a better than expected Euro zone Services PMI which was 0.6 higher than last month’s 53.1. The Eurozone flash CPI reading was also above expectations at 1.1% and higher than last month’s +0.6%, probably reflecting the higher oil price. Despite the ultimately hawkish release of the FOMC minutes the Euro has gained ground on market positioning. On the French election front Marine Le Pen leader of the right wing National Front has been trying to jump on Donald Trump’s coat tails outlining similar protectionist trade policies

CAD
Canadian dollar strengthened overnight as we saw USDCAD push below 1.34. Most expectations are still for long-term US dollar strength particularly against CAD, this may just be a correction after CAD weakened during the last half of December. US numbers and news continue to be the main driver of CAD however, employment numbers for Canada at the end of this week will help to show Canada’s current direction.

USD
US dollar weakened overnight as investors seem to be wanting more information about the upcoming changes the new administration has planned. Inflation is expected to rise on Trump’s promises of increased spending and tax cuts, but the main question is if Republicans will actually go through with the promises on the campaign trail. This afternoon we have the Federal Reserve releasing its meeting minutes. No major change is expected, but as always investors will be keeping a close eye on any change in language.

GBP
The UK economy continues to defy expectations as it posted a 30 month high for manufacturing PMI at 56.1 against market expectations of 53.3. Manufacturers said that this was due to the sharp fall in the value of sterling which had boosted orders from China, India, the US and the EU. This is an interesting development as it can often take longer for the effects of a currency fall to impact an economy, but it doesn’t appear to be the case here. UK Construction PMI is due for release at 09:30 am this morning and will be inspected for signs of growth again.

This positive news saw the pound push higher but it ultimately stayed in recent ranges as news emerged that the British representative to the EU Sir Ivan Rogers had quit his post weeks before Brexit talks are due to begin. Not wishing to be left out the Orkney island’s announced that they would “explore leaving the UK and Scotland after Brexit” (Orkney has a large oil terminal).

USD
US GDP and Core Durable goods were positive numbers whilst Core PCE Index (the Fed’s favored inflation gauge) were flat and lower than the +0.1% expected. Personal spending was also lower so the Dollar didn’t manage to gain much ground against its developed market peers.

CAD
Commodity prices were soft yesterday and as such the Commonwealth currencies struggled as well. Canadian core retail sales were an excellent +1.4% but Core CPI fell -0.5% and with the oil price stalling the Loonie was under pressure.

GBP
Sterling fell to a two-week low against the Euro after a survey of British consumers showing a gloomy view of the economy’s prospects next year kept it on the defensive. The National Association of Estate Agents said that 84% of homes on member’s books sold for less than the asking price last month which was higher than last month’s figure of 76%. We have UK current account and GDP data this morning.

Euro
ECB said that euro zone inflation will exceed 1% at the turn of the year and the European market is in positive mood this morning as reports surface that Deutsche bank has agreed a $7.2 billion mortgage settlement fine with the US department of Justice, pretty much a 50% reduction on the original muted fine and Credit Suisse has also agreed on a fine of $2.48 billion. Both stocks have jumped higher this morning in contrast to the Monte Dei Paschi shares which have dropped 17% over the past 2 days. It is now highly likely that the bank will have to receive state aid.
 

CAD
Today and tomorrow are the last days of releases for any Canadian data on the year as several have been moved up due to the holidays. We saw Canada weaken overnight as expectations CPI may be negative for Canada. The number came in at -0.4 against -0.1 expected. However, we saw retail sales show a nice gain of 1.4% against 0.7% expected. Combined with positive US news we’ll likely see USDCAD challenge 1.35 and potentially break through this morning. This could be the last big movement of the year, so if you see a number you like it could be a good idea to jump on it, else you may have to wait for the new year. We have GDP for Canada tomorrow, and then a long holiday break.

USD
There were 3 US releases this morning starting with Core Durable Goods beating expectations 0.5% against 0.2% expected. GDP also beat expectations with 3.5% gains against 3.3% expected. Finally, Unemployment Claims were worse than expected at 275K. The dollar had fallen overnight against most currencies (though not CAD) but these numbers could see some USD strength across the board.

GBP
The pound had mixed performance yesterday, being stable against the US Dollar, lower against the Yen and higher against the Canadian Dollar. On the economic front YouGov said that long run public inflation expectations rose to 3% in December from 2.8% in November, implying UK rates could be raised over time. UK Government borrowing also jumped higher to £12.2 billion which is quite a leap when compared to November’s reading of £4.3 billion. On the Brexit front the European Court of Justice has decided that a free-trade agreement with Singapore requires individual country approval. This means that a post Brexit trade deal will have to be agreed by at least 38 national and regional parliaments, including those well-known Wallonian dairy farmers. Unless the UK government can surmount this issue quickly it will take a long time to agree a post Brexit trade deal.

CAD
A quiet day for CAD as no major releases are due. Tomorrow we have both CPI and Retail Sales for Canada however, both of which could move the market before the Christmas weekend. Markets will likely remain quiet through the new year as most people are either already on vacation or looking to the new year. 

USD
The US Dollar bull trend continues alongside the US equity markets rally with the Dow nearly trading at 20k. At the Bank of Japan meeting it was announced that they would continue their loose policy and this news encouraged some US Dollar sales. We have Crude Oil Inventories out at 10:30, don’t expect much noise behind this report. 

GBP
The pound continued its decline yesterday as Brexit talks continue. Scotland’s First Minister, Nicola Sturgeon has continued to try and establish EU market access after Brexit. Today’s early UK press reports that the UK Prime Minister May is considering a transitional period for Brexit, to avoid companies suddenly having to abide by different rules when it is finally in place. It is interesting to note that in a recent survey of 700 European business leaders by accountancy firm RSM, access to the UK as part of the Single Market is the highest priority for EU firms.

USD
Although the Euro gained a little on IFO number (111.00), it came under pressure again yesterday. Yellen was the main driver after remarks that the US job market was the strongest in 10 years & wage growth is picking up. Note – a survey of 18-30’s showed increased optimism on employment in the US. No monetary policy mentioned in the speech. The Dollar index was also up against a basket of other currencies towards its 14 years high. Canada this morning we have Wholesale month over month sales expected to come in at a positive at 0.3% over a previous -1.2%. With no major US news expected due today, we could see a quick gain for the loonie.

GBP
After a 0.9 fall yesterday the Pound recovered half of the losses in the afternoon following a statement by Prime Minister Teresa May implying that the country could cover EU funding when it leaves. This is just weeks after Brexit Minister David Davis said the UK would consider a contribution to the EU budget in return for access to the Single Market. The earlier losses seemed to be a combination of uncertainty over how parliament will help UK businesses to manager Brexit & still the US FED IR decision last week.

Euro
EURUSD saw a similar move to GBPUSD yesterday - but a weak Euro helped the Pound in the afternoon. ECB Weidman stated Oil prices could stabilize at these levels and added ECB policy is becoming looser as real rates fall. Key headlines were; Housing market in Eurozone are at risk of overheating, Trade barriers could weaken – risk to growth, Small German budget surplus which means no need for stimulus.

CAD
This will be a busy week for CAD as a lot data for next week has been pushed ahead to be released this week instead. In particular, Canadian GDP which is usually released on the last day of the year will instead be released this week on Friday. Oil prices pushed higher but we saw no reaction in the Canadian dollar, while oil and CAD remain correlated oil is no longer the major mover for CAD. Today looks to be quiet however as we have no released for CAD.

USD
A quiet day on the news front for USD with no major data releases. The week in general is relatively quiet with only Wednesday and Thursday having releases to watch. Yellen is due to make a speech at the University of Baltimore, but don’t expect any policy news to come out there. The one interesting thing to watch today is the Electoral College’s vote for president which are formally logged today. While a lot has been made recently for the ability of these voters to go against their states wishes and elect Clinton in place of Trump such a move would be completely unprecedented. At most we may see a few votes change, but not enough to effect the majority. On top of all that the votes aren’t actually announced until January.

JPY
The Yen has weakened again in advance of the BOJ meeting today, in this post US election new paradigm safe haven trades are losing their lustre. Hence the Yen and gold have both had large drops in value. We’ve seen the Yen rebound some since that drop and we could see further volatility over the course of the BOJ’s two day policy meeting.

USD
The Fed finally announced a rate movement yesterday, and as expected we saw a 25 bps hike with the Fed. The market had largely priced this in, however during the conference afterwards Yellen signaled an intention to raise rates three times next year as opposed to the twice the market had been predicting. This caused a second spike and has led us to break through 1.33 overnight. Yellen only said that the Fed was “operating under a cloud of uncertainty”. The US equity markets paused for breath at this news and sold stocks lower and the market will look at US CPI for more direction later today. On a smaller note US retail sales only grew 0.1% although it is understandable that they should fall after the previous month’s excellent 0.6% leap higher. Producer prices were +0.4% both had little effect as most movement was in anticipation of the Fed’s decision later that day.
This morning we had a nice set of numbers release as US CPI came in at 0.2% as expected, and unemployment claims came in at 254K. The Philly Fed Manufacturing Index beat performances as the survey showed much better results than anticipated at 21.5 actual to 9.1 expected. These numbers would likely strengthen USD on a normal day, but the market is still reacting to the Fed yesterday. Expect this to help solidify the gains for USD yesterday.

CAD
It’s been a quiet week for CAD news wise as we’ve been riding US Fed news. As stated above we’ve broke through 1.33 and there’s little reason to expect a drop in the coming weeks. Remember, we were above 1.40 last year and if the two banks continue to diverge in policy we could see CAD could continue to weaken. Buyers need to be prepared for a weaker CAD going forward. We had our first data release of the week today as Manufacturing Sales came in lighter than expected at -0.8% against 0.7% expected. Again this won’t move the needle much as the real news is still the Fed number yesterday, but it won’t help CAD against any other majors.

GBP
UK average earnings were stronger than expected at 2.5% although the claimant count change was mixed as there were only another 2.4k new claimants for November but October saw an increase of 13.3k. US retail sales data was a little disappointing and so GBPUSD squeezed higher before the Fed meeting. On the announcement of a slightly more hawkish Fed than expected GBPUSD pushed lower and has stayed lower before the BoE Monetary Policy Committee (MPC) interest rate decision today. With the continued uncertainty of Brexit the Bank has kept rates at 0.25% as expected.

USD
US equity markets pushed higher yet again whilst the Dollar was a little soft as the market booked profits on the Trump rally. The market now waits for US retail sales and the last diarised event for the year, the expected Fed rate hike this evening. There are theories abounding that the Fed could actually raise 50 bps rather than the expected 25 bps and certainly if we get anything other than a 25 bps hike and two expected rate hikes for 2017 we could get some volatility in the US Dollar. The Loonie has benefited the most on the back of the oil price. If the US does raise interest rates today it will be the first time since 2007 that Canada and US interest rates aren’t matching each other. In addition to pushing the market this will also affect the pricing for forward contracts as the forward points will increase.

GBP
The pound had some legs yesterday after Chancellor Hammond said that he would be in favour of a “transition” period which allowed the UK time to adjust its economy to life outside the EU. His comments coincided with a House of Lords report that said the UK must set out plans for a transitional deal with the EU. UK CPI came in at +1.2% YoY and slightly above the markets expectations of +1.1% which again added support to sterling. We have average earnings data due for release this morning and it will be interesting to see if today’s data points to higher levels of inflationary forces in the UK economy.

Euro
The Euro again squeezed higher against the Dollar before the all-important FOMC meeting tonight. The interest rate markets showed wider differentials between European and US rates but the EURUSD rate stayed in recent ranges. German ZEW economic sentiment was a little disappointing coming in at 13.8 and the same level as last month’s reading with the market expecting a higher reading.

USD
In what is being seen as desperate measures Trump opponents are trying to draw a connection between Russian involvement in cyber-attacks and a Russian role in the election outcome. Trump himself has been tweeting about how absurd this is but it does add a small element of uncertainty into the Electoral College vote on December 19th. Yesterday saw the Dollar weaken pretty much across the board as the market booked profits before the FOMC on Wednesday evening. With 100% probability of a 25 bps hike built into the market it could be disappointed if the accompanying statement is not very hawkish.

GBP
Without any major data out yesterday sterling managed to rally on technical trading. The market is positioning itself for the Fed on Wednesday and the BoE on Thursday. Although the market expects no change from Governor Carney later this week, his thoughts on Brexit and inflation will be closely studied. UK CPI is due for release today with any large jumps higher in inflation seen as putting the BoE under pressure to raise interest rates.

Euro
The single currency was also the beneficiary of Dollar weakness as it pushed higher yesterday. Although new Italian PM Gentiloni announced a new Government there was already a threat to resign from a centre right ally, so the Italian story continues to rumble along. The market will look for direction today at German ZEW economic sentiment to see how positive Europe's largest economy is currently feeling.

USD
It’s a quiet morning for data and this may be the last week of the year where the market is around to react. For this week eyes will be on Wednesday when we have the Federal Reserve rate decision. Expectations are that we’ll see our first rate increase in some time. This has largely been priced into the market so there likely won’t be a major shift unless we they unexpectedly decide not to raise rates, or the statement after is more hawkish. The newswire is quiet until then.

CAD
CAD takes a backseat for most of the week as we have no major releases until Thursday. Canadian dollar hit a seven week high against the dollar after increasing oil prices. USDCAD is close to where it was last December, where we saw a spike above 1.4500 in the following January. Despite the recent gains by CAD it’s important not to get complacent and be prepared for a sudden shock to the market, particularly with a new president coming in and policy details slowly leaking out, shifts in markets and expectations can come quickly.

GBP
Last week saw GBPUSD get close to technical resistance levels before falling back as Brexit headlines continue to weigh on sterling. GBPEUR fared slightly better as the market priced in the ECB’s QE actions last week. This Wednesday we have UK unemployment data and Thursday morning retail sales are released before the BoE sets UK interest rates at lunchtime. Apparently there is another legal challenge to Brexit which is due to drag the Government through the courts and as such this will weigh upon the pound for some time to come.

USD

The US Dollar was pushed around by other currency themes and as such was soft in the morning and then stronger in the afternoon after the ECB’s hawkish extension of QE. With the fed meeting next week it looks like the strong Dollar theme is going to last until at least then but the only top tier data release is the University of Michigan Consumer sentiment due out at 15:00 GMT. Yes, the Dow Jones made a new record high again.

GBP

GBPUSD followed EURUSD higher before the ECB meeting with PM May being quoted that she wanted to “see as smooth and orderly a process as possible” on Brexit. After Mario Draghi had finished speaking it was clear that the market was buying US Dollars against both Euros and Sterling. In this case, GBPEUR came lower and then bounced off support and GBPUSD squeezed higher before ultimately following EURUSD lower. It is worth noting that with the ECB easing policy again and UK inflation giving the BoE cause to put UK interest rates up, we could see some bouts of strength in GBPEUR. Regarding Brexit, Scotland and Wales had their say with one comment being that Theresa May would “crucify human rights” if she didn’t refer to parliament before triggering Article 50. The verdict is due middle of January 2017. Interestingly German Minister for Economic affairs Gabriel said that the EU must keep the UK as close as possible after Brexit.

Euro

The Euro pushed higher before the ECB announcement that it would extend QE at the current monthly pace of €80 billion per month until April 2017. From then it will reduce (skinny QE) its purchases to €60 billion per month until the end of December 2017, or beyond if necessary. The market initially focused on the reduction on asset purchases and bought Euros only to hear from Draghi’s press conference that there was a “very broad” consensus to extend the purchases and more importantly that tapering was not discussed. The same as last year, although not to the same extent, the market was whipsawed as Draghi continued by saying that the ECB will have a “sustained presence” on the markets. Draghi avoided answering any questions about the Italian banking crisis.

USD

US short-term rates were a little bit softer yesterday and as such the Dollar had a mixed afternoon whilst it looks to the ECB meeting later today for direction and the Fed next week. The US equity markets continued to push up making record highs.

CAD

The Bank of Canada kept rates unchanged with Governor Poloz voicing concern over US interest rates pushing higher with the Canadian economy having a weak labor market, indicating weakness for the loonie against the US Dollar. RBNZ Governor Wheeler said that overall risks were to the downside for the economy but that the official cash rate would stay at its current level for some time and as this was a change from the very dovish rhetoric of last month’s meeting the NZD strengthened.

GBP

Very poor industrial and manufacturing data coming in at -1.3% and -0.9% respectively pushed sterling lower with some analysts puzzled at the disparity between these two negative numbers and recent positive PMI data. The NIESR report in the afternoon made bleak reading as it stressed that UK GDP growth could be significantly hit if migration is reduced as the UK leaves the European Union. The Minister responsible for Brexit David Davis said that parliament will have a vote on the final Brexit deal.

Euro

The Euro was range bound except against the pound as it waited for the ECB meeting today. Market analysts are expecting a 6-month extension to QE to be accompanied with updated forecasts on the Eurozone economy. This time last year ECB President Draghi disappointed the market and EURUSD jumped 4% after the ECB meeting, so there is potential for volatility this afternoon. Italian PM did actually resign last night with a decision on when the next Italian election will be held due on January 24th, 2017. Monte De Paschi has asked the ECB for more time to fix their issues.

CAD
The main piece of news for CAD today will be the Bank of Canada rate statement at 10:00 am. We don’t expect much to come from this as there’s no press conference afterwards. Typically the Bank won’t be willing to make major shifts without the opportunity to explain afterwards. That said it’s important to keep an eye on as a small shift in language could still move markets particularly with how flat we’ve been the last week. Most eyes are looking to next week as both the Fed and ECB have press conferences scheduled.

USD
President elect Trump made the headlines when regarding the replacement of Airforce One he said that he wanted Boeing to make money “but not that much money.” Boeing’s share price sharply fell by 0.5% but the main point here is that Donald Trump is not a natural politician and as such his propensity for unsettling the markets will be quite high. US interest rates keep moving higher and encouraging Dollar buying with the US Dow Jones index gaining as well. The US trade gap widened to $42.6 bio and it will be interesting to see how president elect Trump will deal with this. US labor costs also rose 0.7% and higher than the 0.4% expected pointing to a US rate hike on December 14th

GBP
GBPUSD has squeezed higher over the past week or so to approach levels seen immediately after the Brexit vote but fell back yesterday on news that Prime Minister Theresa May has now accepted a Labour party motion which requires the government to set out its Brexit strategy. In response to this the government has tabled an amendment calling on MP’s to support plans to trigger Article 50 by March 31st 2017. The Supreme Court is still hearing legal arguments over the government’s authority to trigger Article 50 and on first inspection to a layman the arguments are clearer for parliament to be consulted than not with the bookmakers shortening the odds on the government being defeated. UK Industrial and manufacturing production are due for release this morning

USD

The Dollar lost ground to both Sterling and the Euro as the market exhibited the classic “buy the rumor sell the fact” after the Italian referendum result. This was in spite of excellent ISM Non-manufacturing PMI which was an excellent 57.2 and nicely above last month’s 54.8. New York Fed Dudley said that the impending US Government stimulus would likely spur more Fed hikes and the Dow Jones hit another record high. We have the release of Canadian trade balance today and RBNZ Governor Wheeler talks later this evening.

GBP

UK services PMI beat expectations of 54 by coming in at 55.2 and supported Sterling buying…this data actually means that the UK should finish as the fastest growing economy of seven leading nations, even giving the US a run for its money. Mark Carney the BoE Governor, had a different message when he spoke in Liverpool saying that the UK was “enduring its first lost decade since the 1860’s.” The latest data is certainly positive though with the BoE revising up its forecast for the UK economy and suggesting GDP growth will be 2.1% over 2016, even beating the US, which is forecast to grow at 1.5%. The market also had one eye on the Government's appeal at the Supreme Court. On the Government's behalf Attorney General, Jeremy Wright QC said that “the use of prerogative in foreign affairs is not an ancient relic but a ...fundamental pillar of our constitutional state. The need [for governments] to maintain control of strategy and policy matters is clear and compelling.” The opposing case opening arguments are heard this afternoon but to precis things; if the Government wins then Sterling will fall quickly if the High Court decision is upheld and parliament has to be consulted before article 50 is triggered Sterling will squeeze higher.

Euro

Twice bitten thrice shy could be the market's motto after yesterday. The EURUSD market only managed a 1% fall followed by a 2% rise in the wake of the Italian referendum “No” vote. EURGBP had a 1.5% move from low to high and even though Italian banking stocks were weak and volatile the market was relatively calm when compared to the Brexit and US Presidential votes. Italian Prime Minister Renzi has actually been asked by the Italian President to stay on until the Italian budget is passed although this may well be done quickly and many analysts are now estimating that a technocrat government will come in until 2018. Although this is a far way off, the fact remains that Italy is now only two steps away from leaving the Euro.

USD
Managed to stay firm last week as President-elect Trump toured the US on a “Thank you” tour with the important US jobs data coming in above expectations at 178k and an excellent unemployment rate at 4.6%. President-elect Trump has been tweeting about US firms moving abroad and being hit with a tax if they try to sell goods back to the US as well as upsetting China by talking directly to Taiwan. The details are slightly irrelevant but the overall view is the global trade will take a tumble.

CAD
Last week OPEC agreed to production cuts and gave the Commonwealth currencies some support. This week sees the RBA setting interest rates on Tuesday where analysts expect no change. The Bank of Canada meets on Wednesday and is expected to stand pat as well. New Zealand Prime Minister Key surprisingly resigned at the weekend.

GBP
Last week saw Sterling gain against the Dollar and Euro as the Government suggested that a “soft” Brexit could be considered (if the EU were open to such a deal). Today sees the UK Government appeal to the Supreme Court as it tries to keep to its self-imposed end of March 2017 deadline for triggering Article 50. The verdict is due middle of January and if the Government loses the appeal it will have to go to Parliament to get approval. The weekend press was also full of ideas about a “gray” or “soft” Brexit. If this is the case then the Pound will continue to gain support, especially with Europe having to cope with the Italian referendum vote and Greek debt negotiations again. We have the important UK Services PMI due for release today as well as inflation expectations at the end of the week.

Euro
If the market thought that it could get relief from the Austrian population voting in a green party president and moving away from populism it was disappointed as Italian PM Renzi conceded defeat for his constitutional changes at 11:20 pm GMT Sunday evening also announcing that he would resign Monday afternoon. Whilst he was speaking the Euro made new lows against the Dollar not seen since March this year and the market now asks whether a general election will be held or if a technocrat Government will be installed. Whilst the Euro has fallen quickly the market will now look at the Italian banking stocks to see how far and fast they will fall at today’s market opening. This week sees the ECB meeting on Thursday with the ECB now having been backed into a corner by the referendum vote. An announcement to extend QE is now a 65% probability. Greece was also told over the weekend by Germany to make painful reforms if it wants to stay in the Eurozone. Alexis Tsipras has seen a record 20 point dive in popularity with 90% of Greeks now disgruntled by his Government. Difficult times loom again for Greece.

USD
ADP released non-farm numbers that beat expectations yesterday, leading to hope the official number will be strong this morning. The dollar stayed relatively steady and Fed Governor Kaplan said that he does see rate hikes ahead without a US recession and added that the stronger Dollar needed to be taken into account when setting policy. A strong currency can slow inflation, with the market all but guarantee rate hikes in December this will be something to watch.

CAD
Employment numbers are due to release this morning. The market is expecting a loss of 16.5K from Canada, after an increase of over 40K last month. The unemployment rate is expected to stay steady at 7.0%. Last month’s number was a surprise beat, so some are expecting a downward correction on that number as well. A beat here coupled with disappointing Non-farm numbers out of the US might see Canada finally break back through that 1.33 barrier it’s been above all month. A miss, and we may find our way trending back to 1.35

GBP
Early London trading yesterday saw the release of UK manufacturing PMI which was slightly disappointing and caused light Sterling selling. This was followed by a comment from David Davis who said that the UK would consider making EU budget payments if required to meet the aim of gaining the best possible access to EU markets for goods and services. Thus he fired the figurative starting gun for Sterling as it opened up the possibility of a “soft” Brexit and the Pound jumped higher quickly. It burst through technical levels only pausing for breath near the London close and has managed to steady at higher levels overnight. This is the first comment from David Davis that has been relatively specific whilst leaning towards the possibility of a “soft” Brexit and as such could prove to show a slight change in Government policy towards Brexit.

USD
ADP non farm employment change was a very pleasing increase of 216k jobs and much higher than the 161k expected, favouring a positive Non farm payrolls release tomorrow. Core personal consumption expenditure (the Fed’s favoured inflation gauge) rose +0.1% as expected with personal income rising +0.6% whist personal spending only rose +0.3% and the Dollar stayed firm especially against the Yen and emerging market currencies. Donald Trump chose his Treasury Secretary ex Goldman Sachs banker Mnuchin who is targeting US growth of 3%-4% and will look to achieve this through tax cuts and investment.

CAD
The Opec agreement was the real story yesterday as the oil producing nations agreed production cuts of around 4% (Russia agreed to cut production as well) which managed to produce around a 10% rise in oil prices. It remains to be seen whether oil can stay at these levels especially with US fracking being flexible and able to increase production quickly.

GBP
End of month selling of GBPUSD pushed it lower by 0.5% in the morning but it recovered this and pushed higher by end of trading supposedly on the coat tails of the Opec production cut deal. The market will look to manufacturing PMI due for release at 09:30 to see if the decent post Brexit vote data continues. Chancellor Hammond visits Scotland’s First Minister Sturgeon today with the latest polls (if they can be trusted) showing a drop in support for Scotland’s independence.

Euro
The focus wasn’t on the Euro yesterday but the market does have one eye on Sunday’s Italian constitutional referendum. Italy’s PM Renzi said that after the referendum strategic solutions are needed for immigration, banks and economic growth and despite Eurozone inflation reaching +0.6% and its highest point in 2 and a half years the Euro was soft all day. There isn’t any top tier data due for release today for the Euro but Bundesbank President Weidmann speaks in the afternoon.

CAD
It’s a busy week of news and data releases after last week saw relatively few. This morning Canadian GDP will be released. Economists are expecting a relatively modest 0.1% increase month over month. In addition OPEC countries continue to meet trying to set supply and price of oil. There’s been a lot of anticipation for this meeting over the last month or so as it’s looked increasingly unlikely the oil producing group will come to a consensus on whether to cut production. If something firm comes from that meeting we could see an impact on oil, despite the Canadian dollar decoupling from oil recently it still finds itself moving based on major shifts.

USD
ADP released their Non-Farm Employment projection this morning, expectations were for an increase of 161K, the number was a solid beat at 216K. This bodes well for the Friday release of the actual number.

Euro
The referendum in Italy is beginning to loom and if the result is a “yes” then Prime Minister Renzi will have a chance of making some changes to the Italian economy. If the result is a “No” the planned Euro 5 billion recapitalisation of Italian bank Monte Dei Paschi may be in trouble. It is probable that the Italian banking sector will be under extreme selling pressure and as such a systemic banking crisis could become a reality. If this is the case then the ECB may be forced to step in and impose a “bail in”, alongside launching a scheme to compensate individual bond holders

USD

The Dollar was soft at times after month end sales but overall the strong Dollar theme continues. New York Fed Governor Dudley speaks today and should keep the Fed on course for a rate hike next month. We also have the release of US consumer confidence for momentum.

CAD

The market is focusing on whether Opec will manage to agree on a production cut deal and stick to it at its meeting tomorrow. There were positive headlines about an agreement yesterday and as such the oil price managed to strengthen on the day with the CAD gaining in tandem. The iron ore price fell hard overnight and as such capped any AUD strength.

GBP

The market opened up to yet another legal question over Brexit with the possibility that the Government may need to trigger Article 127 of the European Economic Agreement as well as Article 50 if it wishes to leave the European Economic Area (EEA) i.e. the Single market. The next question is whether that would also require a vote in Parliament and whether Parliament will actually do this. The Governments position is that the UK is only part of the EEA agreement in its capacity as an EU member state and once the UK leaves the European Union it will automatically cease to be a member of the EEA. This new development helped Sterling fall back after an early morning rally although it was interesting to hear BoE’s Vlieghe comment that the slowdown in UK growth was not as sharp or sudden as expected in august, it was more like a “slow-motion slow down”.

Euro

The Euro had popped higher on short covering Asian trading but with the Italian bank index hitting an 8 week low it soon turned round and weakened. With one eye on the Italian referendum to come this Sunday ECB President Draghi said that Italy’s debt was sustainable although there was no room for complacency. He also thought that the pattern for significant (market) reactions to uncertainty is to subside. With no Eurozone top-tier data due for release today the Euro will be moved by other currency themes.

USD

Last week saw the Dollar strengthen mainly against the Yen and emerging market currencies as it priced in its estimated Trump affect although it also had bouts of strength against its developed market peers. The release of the latest FOMC minutes helped the market give a 100% probability of a December rate hike and with only 3 full on trading days last week the US equity market jumped higher in the early part of the week. Personal Consumption Expenditure (PCE) the Fed’s preferred inflation measure is released on Wednesday and Friday sees the release of the last non-farm payrolls number before Decembers Fed meeting. This is the last economic data release that could possibly stop the Fed from hiking rates in December so it needs to be a very weak number to upset the market.

CAD

Wednesday is the big day for the CAD as Opec meets with the intention of ratifying production cuts. The main data event for the AUD is the release of retail sales due on Friday. We also have the release of Chinese manufacturing PMI on Thursday although it wouldn’t surprise if USDCNY continued to stay firm in the current environment.

GBP

It is interesting to note that in a time when the Dollar has been strong Sterling managed to push higher against the Dollar and Euro last week. This was in a week when we had the first Autumn statement delivered by Chancellor Hammond, which didn’t really have any major effect on the pound and yet more news on how the UK and EU can’t even agree to start positions over Brexit. The weekend press saw BoE Governor Carney suggesting a period of continuity for UK business to continue operating under current EU rules after the UK leaves the EU. This “Brexit buffer” would last for at least two years and would give business time to adapt to the Brexit departure terms. This week we look forward to the release of UK bank stress test results on Wednesday which is followed by manufacturing and construction PMI readings Thursday and Friday.

Euro

The spotlight has been firmly on the Euro as the market prices in forthcoming Eurozone political risk. Italian PM Renzi has now repeated his threat to resign if he doesn’t get his constitutional changes passed by electorate with the vote coming next Sunday, Dec 4th. The Austrian Presidential election will also be rerun that day and although the post doesn’t carry a lot of political weight it will be of concern to many Europeans if Austria votes in a far right leader. There are reports that a far-right leader could give the Austrian electorate a referendum on EU membership. Regarding Turkey, as reported last week the EU has temporarily frozen Turkeys application to join the EU and President Erdogan has now threatened to open the gates for migrants to enter Europe if the EU “goes any further”. It is estimated there are 3 million immigrants in Turkey at the moment, Germany struggled with accepting 1 million immigrants last year. In France, the Republican party have now nominated a former Prime Minister Francois Fillon to lead the party in the French election next year. His choice is controversial as he has pledged to sack 500k civil servants and adopt “Thatcherite” reforms. He was also reported in the Sunday Times as wanting to restrict immigration to a “strict minimum”. How is that going to work in the EU? On the economic side of the equation, ECB President Draghi speaks twice this week and he will be watched to see if he confirms last week’s message from others at the ECB that the Eurozone banking system is not best placed to face shocks in the monetary system.

USD
Given the US holiday markets are expected to be thin with most traders home with their families. Despite this most other countries are still working today so markets have the potential to move. If they do swing there is a good chance that returning traders on Friday might swing the market back, unless there is a fundamental reason for the shift. As for data, there’s none to report today – unless you count the score of the Minnesota Detroit game this afternoon.


CAD
The loonie has continued to weaken largely on continued expectations of a FED rate hike. Markets have moved close to a 100% expectation of a rate hike come the December 14th meeting. Many are now projecting a potential for CAD USD to fall even further with senior economist at Desjardins, Jimmy Jean, projecting a 1.3700 close by end of year and further depreciation as 2017 continues. Oil prices are also expected to stay low on doubts OPEC will come to an agreement to cut oil production significantly enough to impact the price. Buyers of USD may want to considering protecting some of their exposure with a forward contract.

GBP
The Pound was soft before the Chancellor stood up to give his Autumn statement but steadied after, as the Chancellor’s statement provided some £23 bio stimulus (much more than the £5 bio muted at the weekend) and trying to get UK production higher. The Government will have to borrow money to fund this stimulus and with Brexit probably causing a deterioration in the public accounts as well the inference is that UK interest rates will have to rise. In this case the Pound held its ground across the board overnight although with thin markets we may see a shift.

USD
This morning we had unemployment claims release for the US, missing expectations slightly at 251K which was more than the 241K expected. However, we say Durable Goods Orders beat expectations significantly, in particular Core Durable Goods increased by 1.0% m/m over the 0.2% expected. This strengthened US slightly this morning, however eyes now go to later today when we have the meeting minutes from the Federal Reserve being released. We’ll be looking to see if the language confirms the expectations of a rate hike in December. Right now the market is treating this rate hike like a near certainty so any language away from it could impact markets.

CAD
The commodity markets have been rising with iron ore surging some 8.5% over the last 24 hours. Oil tried to hit $50 again but failed after OPEC sources said that Iran, Iraq and Indonesia had reservations regarding the proposed 4.5% cut which encouraged CAD sales. All in all CAD has been relatively flat and has no major data releases due until next week.

USD
Fed’s Fischer added to the Dollars upward bias by saying that a higher Dollar would not stop the Fed from doing what they should do for the domestic economy, although the Dollar did pause for breath a little yesterday after 10 straight days of strength against the Euro. The market is now suggesting a 100% probability of the Fed hiking rates in December, which could lead to Dollar weakness after a rate hike in a classic example of “buy the rumor sell the fact”. The US stock markets continued their march higher, especially the Dow which closed at an all-time high. President-elect Trump released a video yesterday saying that as soon as he was elected he would withdraw from the TPP trade deal whilst preferring bilateral trade deals. TPP covers trade between the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru and is one reason why the aforementioned currencies have been under pressure against the Dollar.

CAD
The market is pricing in a possible Opec deal and as such the Loonie had another reasonable day with the NZD and AUD following suit. Canadian core retail sales month over month came it at 0% over an expected 0.6% resulting in a slight uptick for the USD over CAD.
 
GBP
UK PM May explained her vision of caring capitalism as well as stating her wish to cut corporate taxes yesterday at the CBI annual conference. She also hinted that the Government could seek a transitional deal to avoid the UK economy being on a “cliff edge” of uncertainty. Both of these actions, if they come to fruition will be seen as positive for the UK economy and as such bullish for Sterling. Initially, the market took this in its stride until lunch time when in a thin market STGEUR stop loss buying hit the market and the pound jumped 100 points in 5 minutes. The market is nervous and trading conditions are thin so these spikes in price may well become the “new normal”.
 
Euro
ECB President Mario Draghi yesterday told the markets that he was in favor of maintaining interest rates at current levels in his desire to boost Eurozone inflation towards its 2% target rate. His comments are important as it indicates that the ECB could well decide to extend its Euro 80 billion monthly bond purchases. ECB Board member Coeure confirmed this stance by saying that the time to start winding down the ECB’s stimulus package had “not yet” come. The market will look to EU consumer confidence for additional direction today.
 

USD

We’ve had 10 days in a row of Dollar strength against the Euro and it does appear that the market is pricing in a new paradigm. Last week Fed Chair Yellen didn’t say anything to put the market off expecting a rate rise in December but the market will look for confirmation of this when durable goods are released on Wednesday. We do have US thanksgiving holiday on Thursday but at the moment the interest rate markets are still pointing to Dollar strength. Wednesday sees the release of the last FOMC meeting minutes.

GBP

The market spent last week pricing in its expectations for a Trump Presidency which basically include higher US interest rates and a stronger Dollar across the board. This of course means a weaker GBPUSD but the UK inflation data released last week was not as strong as expected and when BoE Broadbent on Friday implied that the BoE was more focused on keeping as high levels of employment as possible rather than keeping inflation under control GBPUSD ended the week on a soft note. The main focus for Sterling this week is the Chancellor Phillip Hammond’s budget on Wednesday which the market has been told to expect a “reset for the UK economy”. With the Government still having to wait for the Supreme Court’s verdict on the triggering of Article 50, the pound is in limbo and the Chancellor could well just present a “steady as she goes “ budget so that he has some powder left should the economy take a real dip. In this case, analysts don’t expect huge tax cuts or stimulus this Wednesday.

Euro

The Euro has had a streak of 10 losing days against the Dollar weakening some 6.5 % since Donald Trump became president elect and this has been preceded by a Q3 2016 range that had only a range of 3.53%. Last Friday ECB President Draghi didn’t say or imply anything about the EURUSD level event though we are now trading near the 2015 lows. He did say that the “Euro recovery still relies to a considerable degree on accommodative monetary policy” and as such analysts are still expecting an extension to QE to be announced in December. Draghi speaks again today but the market is getting nervous over the many risks to the Eurozone coming in the shape of Italian constitutional referendum (December 4), the Austrian Presidential elections (December 4), the UK Supreme Court Brexit hearings (December 5-8), the European Central Bank's policy meeting (December 8), and the Federal Reserve's policy meeting (December 14). Angela Merkel has now said she will seek a fourth term as Germany’s leader.

ROW

On the back foot all week and without any major economic data points this week they will be at the mercy of the positive Dollar sentiment. Russia’s Putin said over the weekend that Russia was ready to freeze oil output and that there is a high probability of an Opec deal although it is not 100%. The Loonie has firmed on this news and was the only currency that made gains against the dollar last week.

USD
The dollar index is at a 14-year peak as continued strong economic numbers come out for the United States leads to further belief that a rate hike is imminent. Fed Chair Yellen testified in front of Congress yesterday and said rates should increase ‘relatively soon’. It feels like relatively soon has been the go-to statement for the whole year, but markets appear to be taking this time more seriously and a rate hike in December is now largely being priced in. We have three speakers from the Fed this afternoon – Bullard, Dudley and George.

CAD                                                                              
CPI for Canada came out this morning just missing expectations but beating out September’s number. The release was 0.2% increase month over month against 0.3% expected. Canadian news is taking a back seat to the US for now, but as things settle post-election and after the next Fed announcement we should see a return to normalcy.

GBP
The British consumer is continuing to spend with retail sales showing an excellent increase of 1.69% in October but the pound surprisingly couldn’t muster any reasonable strength on this. With the bullish Dollar sentiment in the afternoon Sterling did well to maintain recent levels but overnight it has succumbed to Dollar strength. MPC member Broadbent speaks at 09:30 am today.
 
Euro
EUR has continues to fall against the US dollar and for the first time since inception has fallen for 10 straight days. This has been in party because of Draghi’s comments that stimulus for the Eurozone would continue until inflation appeared to be self-sustainable. With the addition of a US rate hike appearing more likely EUR has had a bad week, against the greenback.
 

USD
The Trump effect took a breather yesterday with the US Equity markets softies although the Dollar still managed to gain ground against the Euro and Commonwealth currencies as the market also considered Trumponmics possible tax cuts stimulus and repeal of Dodd-Franks. Overnight Philly Fed governor Harker said that he supported a December move in rates. The main events for today are US CPI this afternoon and then Fed Chair Yellen’s testimony this afternoon as the market looks for any comments on a probable US rate hike in December.

CAD                                                                              
Out this morning Canadian Foreign Securities purchases came in much lower than expected at 11.77B over an expected 12.23B. At 10:30 am EST the BOC will release the autumn issue of their review.

GBP
Although the unemployment rate fell to 4.8% the claimant count increased again making it 3 monthly increases in a row. Average hourly earnings were steady at 2.3% but it is worth noting that with inflation rising wage rises will not be felt so much. This left the pound range trading on the day and waiting for today’s retail sales data.
 
Euro
Swiss ZEW came in at 8.9 and a nice improvement on last month’s 5.2. which helped push the EURCHF closer to last Junes lows. The rhetoric from ECB’s Moscovici was slightly negative for the Euro as he commented that the Eurozone Governments face eurosceptic challenges in 2017 elections. Just to remind us of the deadline for Greece’s debt restructure German Finance Minister Schaeuble said that granting Greece debt relief would do it a dis-service. The Euro was also soft against the Dollar although it did manage to hold important long-term technical support levels. On the other hand, good news for the Euro came in the latest polls which indicated that Le Pen would not win next year’s French election.

USD
The US consumer had a good October with retail sales MoM rising +0.8% and above the expected +0.6%. This gave the market more reason to buy Dollars with Fed Governors Kaplan and Rosengren saying that the sooner the better to hike rates and Washington stimulus would bring more rate hikes respectively. On the Trump front, it appears that his cabinet is taking shape along the lines of his Presidential campaign with a hard line on immigration and trade.

CAD
Canadian Manufacturing sales came in better than expected at 0.3% over and expected -0.2% slightly boosting the loonies’ value over USD. At 12:05 pm BOC Council Member Timothy Lane is set to speak about Canadian Globalization which could pose to be of interest given president-elect Trumps option regarding our trade deals currently in limbo. 

GBP
The announcement by the BBC that the British Government does not have an overall plan for Brexit alongside an FT report that the EU is considering charging the UK between Euro 40 billion and Euro 60 billion to leave the EU were enough to put the skids under Sterling early on. The Government said that it “did not recognize” the supposed leaked memo which the BBC had used for its story but this didn’t help the Pound as it was also hit by a lower than expected CPI YoY number coming in at +0.9% and lower than the expected 1.1%. What did help the Pound later in the day was an announcement by a UK Supreme Court Judge that Brexit could be delayed for two years. Today we have employment data and average earnings will be watched keenly for signs of strength.

Euro
Eurozone data was healthy with German ZEW especially pleasing at 13.8 and much higher than last month’s 6.2. Eurozone flash Q3 GDP was as expected at +1.6% . ECB’s Villeroy commented that the EU was making progress reaching its inflation target and with Euro being bought against the Pound it gained ground against the dollar as well until New York traders took over to sell Euros and buy Trump induced Dollars.

CNY
The main mover was the Loonie yesterday as the market saw the oil price jump some 5.5% on the hope of an Opec output cut agreement. In the background has been the decline of the CNY against the Dollar. This is now at levels not seen since 2010 and could well be a signal to President Trump that if he wants to label China a currency manipulator he cannot expect China to roll over.
 

USD
The Dollar continued its push higher as it prices in Trumps supposed new policies. Fed Governor Kaplan added fuel to the fire and said that the Fed will raise rates in the “near future” and that infrastructure spending makes sense. The Dollar has been bought across the board with USDJPY amongst the highest gainers strengthening some 7% in the last 4 working days. US retail sales data will give us more direction this afternoon. No Major Canadian news out today.

GBP
Sterling lost its shine against the Dollar as it hit technical levels but at least managed to hold recent gains against the Euro. We have UK inflation data for release at 09:30 am and this is followed by BoE Governor Carney’s inflation testimony in front of parliament on inflation at 10:00 am. It is interesting to note that UK inflation has pushed up quickly and stopped the BoE from cutting rates this month as it had suggested it would.

Euro
The Euro was soft again yesterday and fell to its lowest level against the Dollar so far this year driven by Dollar bullish sentiment and also a concerning fall in industrial production of -0.8%, although Augusts data did see a +1.6% jump higher.ECB Draghi didn’t make any market moving comments but ECB Vice President Constancio did warn of political and economic risk from Trump’s election win. Bond markets have been falling after the US Election as they price in forthcoming stimulus, inflation and higher interest rates with the Italian bond market hardest hit as its yield hit its highest level since September 2015. European GDP data will move the market this morning as German ZEW economic sentiment.
 

Today will be a quick update as it is both a US and Canadian bank holiday. If you are looking to set up any payments or transactions they will not be processed completely until next week.

USD
The market is slowly getting used to the idea of a Trump presidency, and it’s becoming more clear as to what his plans are in terms of the team he’s putting in place. Policy is still a bit hazy, as he’s mentioned wanting to repeal Dodd-Frank and replacing it with, well, something. He’s also mentioned repealing NAFTA and going against TPP. Full details are still coming and until then markets will be liable to swing in either direction.

CAD
Today Gov. Poloz speaks in Chile on a panel discussion. Odds are unlikely this will affect markets, as his remarks aren’t due to be published on the bank website, and with today being a bank holiday we won’t know if he said anything important until next week.

GBP
We saw a short jump on GBP, the idea is that President elect Trump has promised that the UK will be at the front of the queue when it comes to trade deals with the US and this fact combined with the legal challenge to the triggering of Article 50 which could force the government to go for a “soft Brexit”. Hence there is some short term reasoning to buy the Pound

 

USD
After the initial fear selling of Dollars and US stocks as the market realised that Donald Trump was actually the most powerful man on earth the Dollar and US asset markets made a huge about turn and after futures markets being closed limit down in Asia they bounced as well. The market has attributed this “Trump jump” to a review of his potential policies which could actually be inflation inducing (just one starting point being that he has planned huge infrastructure spending and not said where the money will come from). To deal with inflation US rates will have to rise and of course Trump has already criticised Fed Chair Yellen for keeping rates low for long. The Senate is also under Republican control he may well be able to cut taxes and increase spending. Keep in mind tomorrow is a bank holiday in Canada and the US so any payments scheduled for tomorrow will not be processed until Monday.

CAD
The Canadian dollar recovered slightly against the loses it sustained after the election headlines but as the day went on and markets recovered USD continued to strengthen. We continue to be at the weakest CAD levels we’ve seen since February for USDCAD. Lastly, keep in mind tomorrow is a bank holiday in Canada and the US so any payments scheduled for tomorrow will not be processed until Monday.

EUR
The Euro was an initial strong beneficiary of the Dollar’s weakness but as the day wore on the market focused on the up and coming Italian referendum (Dec 4th) and next year’s elections in France and Germany. These are huge event risks and now with the US election finally over many are considering these events elsewhere. Tomorrow we have German CPI for release which will be inspected for clues as to the ECB’s next move on QE.

 

USD
This has been a bad year for pollsters as yet again they’ve missed their prediction. If you’ve somehow missed the news, yes, Trump won the presidency, to go along with a Republican House and Senate. Markets reacted swiftly with equity markets falling: Nasdaq futures trading was suspended and the Dow fell over 4.5% in overnight trading. Remember, the last time there was a presidency change with Obama coming in markets also took a hit, and it was temporary. The Mexican Peso fell to record lows with MXN/USD down over 8%. USD fell against EUR, JPY and GBP though it strengthened against CAD. This puts a lot of things on the table for the US including changes at the Fed, we’ll need to keep a close eye on announcements over the next couple of months to get a better handle on what a Trump victory actually means and if this moves to an even more dovish Fed. Many suspect Trump has no interest in the actual governance and policy of the presidency and that policy will actually be handled by his VP, Pence.

CAD
CAD fell below 1.35 against USD and has since recovered slightly. EUR/CAD so an even further drop going from around 1.4600 to 1.5200 overnight before settling down to around 1.4800. As always having market orders in would have given you a chance to capitalize on these movements. Markets are moving away from risk and towards safe haven currencies as well as a rallying gold price. We’re seeing less and less of a correlation between CAD and commodities this year, and CAD has weakened with the uncertainty in USD. Some expect this election may push the Bank of Canada closer to cutting rates another signal for weak CAD. Poloz speaks this Friday in Chile so we’ll be keeping an eye on seeing if his tone has changed at all. Lastly, keep your eye out for some new neighbours coming up from the south - the Canadian immigration website crashed last night.
 

USD
Election day is finally here. The only piece of news the market will be watching today is the US election regardless of currency pair. Polls continue to show a Clinton victory as the likeliest outcome which has caused some stabilization in the markets and we’ve seen equities jump as we get closer. A Trump victory at this point would be a big shock to the markets and we could see a major hit on the US dollar if it happens, with many expecting that the potential of a December rate hike by the Fed hinging on the results. There’s some major news before then which could shift the Fed either way. There’s a good chance any hit would be temporary, so think about putting in a market order to be able to capitalize if we do get any movement. Additionally, Trump has repeatedly said he felt the election was rigged and that he may not concede in the case he loses, so we may see significant volatility around a close result even if it is a Clinton victory. While his conceding is simply a custom with no legal requirement it does through further uncertainty into the US. As of writing 538 has the likelihood of a Clinton victory at 71.6%, Princeton Election Consortium has Clinton at a 99% and CNN projects a Clinton victory as 91% likely.

CAD
There’s no major Canadian news out this morning, with the only number based around Housing Starts and Building Permits. Both missed, but won’t move markets at all. All eyes are to the south for the election so don’t expect anything else to move CAD for today.

GBP
While the election is still today’s primary focus, Brexit continues to headline for GBP with further news around the attempt by the prime minister to trigger article 50 and begin the exit. It’s now going to the Supreme Court to try and remove the requirement of getting the approval of the majority of MPs. Given the objections around the exit amongst some MPs this may drag out much longer, and that uncertainty doesn’t bode well for GBP.  

USD
Over the week we have seen some reasonable U.S PMI data coming in as predicted except for U.S ISM non-manufacturing data which missed expectations by 1.2%. This helped the GBPUSD rally up to resistance levels. All eyes will look towards the US non-farm payrolls data this afternoon to see if the US economy can print the 175k figure that’s expected. Overall, though, unless the figures are very wide of expectations the market will look at the latest US presidential election polls for direction.

CAD
Busy day for Canada this morning as we have Employment change, Unemployment Rate, Trade Balance and later this morning the Ivery numbers. Canada is expected to see a loss of about ten thousand jobs which is rather odd considering last month Canada added whopping 67.2K jobs, blowing away the forecasted 8.5K. Perhaps this last month’s job influx came from US citizens as Monster one of the large recruitment companies points to a 58% spike in US citizens looking to work in Canada. More here: http://bit.ly/2flVuK3
 
GBP
Yesterday we saw UK PMI services data come in slightly better than expected at 54.5 rather than the expected 52.4. We also saw no change from the Bank of England, but further volatility was caused by comments from BoE Governor Carney. Carney stated how “we’re not indifferent to the exchange rate” and that “we’re in exceptional circumstances.” He also stated that “we can envisage scenarios where UK rates go either way”. The main volatility, however, was yesterday morning, the UK High Court overruled the Government and stated that the Government cannot trigger Article 50 of the Lisbon treaty and begin formal negotiations with the EU without reference to Parliament. This caused immediate Sterling strength and a large dose of volatility early on in the day.

Euro
We have a busy day for Euro-Zone PMI readings and PMI services data. The Euro is on the back-foot against Sterling’s developments yesterday especially after the low German retail sales data earlier on in the week. Recent support levels have held for GBPEUR this week, although it remains to be seen if this will continue.

USD
On the back foot, yesterday after sources of a fund selling USD aggressively against a basket of currencies emerged. Downside pressure gathered on the back of FBI sources believed to be looking at the Clinton Foundation case edging towards and indictment. Yesterday also the ADP employment report (key indicator ahead of Fridays Job figures) come in below predictions (165K) at 147K. The FED kept Rates unchanged last night with an 8-2 vote; we are now looking at a 78% chance of a hike on December of 0.25 – important to note there will be a reshuffle post-election and Charles Evans who is historically Dovish will have a vote (increasing likelihood before year end). We have ISM Non-Manufacturing PMI out today at 14:00 which is based on 62 different industries and therefore a contributor of GDP.

GBP
Sterling performed a sharp recovery on Wednesday starting with a positive reading on Construction PMI at 52.6 against a predicted 51.8 - indicating expansion & health in the UK Construction Industry. We saw GBPUSD test a high of 1.2355 before easing off to 1.2280 in the New York trading afternoon and then closing at 1.2307. At 10:00 today the Lord Chief Justice will deliver the ruling on whether the UK’s decision to leave the EU must be subject to a vote in Parliament, and therefore has potential to delay the trigger of Article 50 –possible GBPUSD GBPEUR movement. Today we have Services PMI which will give an indication on the activity on purchasing manager’s (note - purchasing managers often have access to accurate company data and can therefore give an indicator of overall economic performance). The big news will be at 12:00 when BoE Carney speaks on Inflation & Interest Rates – unlikely to be move but look for language suggesting a cut in the near future.

Euro
A positive reading of 53.5 on the Eurozone Manufacturing PMI, but relatively quiet data wise throughout the day. Again the sources of a fund selling USD coupled with weak sentiment on the USD saw EURUSD break through 1.11. Look out for Unemployment figures today - predicted at 10% .

USD - CAD

The dollar weakened yesterday as US elections polls tightened a week before election day. A poll from the Washington Post placed the Republican candidate Donald Trump on 46% - one point ahead of Hillary Clinton. On October 23rd the same poll showed Trump 12% behind. As the race for the White House becomes closer the uncertainty of the outcome has prompted nerves in financial markets. Both European and US equity markets declined yesterday and the Vix volatility index increased to the highest level since the UK’s EU referendum in June. Politics is overshadowing fundamentals, with a US Fed decision due late on Wednesday something of a sideshow. Analysts expect the Fed to keep rates unchanged and given there is no press conference at tonight's meeting the most interesting part will be the accompanying statement. In 2015, the Fed more and less preannounced the December hike at the October meeting but, unlike last year, the markets have more or less priced in a Fed hike by year-end as much as possible given that there is still one and half months until the December meeting. Hence, we should not expect any major changes to the statement. For Canada, we have no major data however Gov Carolyn Wilkins is set to speak on “ Innovative Oversight in the Midst of Disruption.”

GBP

Data yesterday showed UK manufacturing continued to expand at a robust pace last month as the weaker pound boosted exports. Manufacturing PMI for October came in at 54.3, down from 55.5 in September, but well above the long-term average. The figures barely moved sterling as traders remain preoccupied with politics rather than economics. Meanwhile, the National Institute of Economic and Social Research said UK inflation would soar to about 4% in the second half of next year and cut disposable income. The NIESR said the rise in prices would "accelerate rapidly" during 2017 as the fall in sterling is passed on to consumers. There was also a fresh warning for sterling as a Reuters poll said the pound is likely to drop around 5% against the dollar soon after article 50 is triggered next year. According to the poll of over 60 FX strategists, the median forecast suggested cable would fall to $1.15 by the end of March.

Euro

EUR/USD bounced sharply on Tuesday, reaching the highest level since mid-October. The price action reflects heavy short positioning and the cross could be in for further gains near term. In Europe today the final releases of European manufacturing PMIs for October are due out.

USD

According to the RealClearPolitics Average Polls, Donal Trump has gained on Hillary Clinton in recent days, with support for Trump now at 44.8% versus 42% before the email story. Clinton is still in the lead, though, with support at 47.7%. The main data release today will be the US ISM manufacturing index for October. It will be important to see if it confirms the positive signs on October activity from the Markit PMI released last week. Jobless claims have also pointed to improvement into October, and we should see a rise in ISM manufacturing from September.

CAD

This morning Canada’s GDP number are due out which is forecasted to come in at 0.2% lower than previous month at 0.5%. I wouldn’t expect too much of a reaction from this as most investors will be waiting till noon EST when Gov Poloz is set to speak on 25 years of Inflation Targets: Certainty for Uncertain Times.

And don’t forget to fill up your tank today as gas prices are expected to jump quite significantly due to issues with supply.

GBP

After much talk and lots of criticism, BoE Governor Mark Carney announced he will extend his term until the end of June 2019. In his letter to the Chancellor, Carney stated that "by taking my term in office beyond the expected period of the Article 50 process, this should help contribute to securing an orderly transition to the UK's new relationship with Europe". Sterling climbed on the announcement which provides more certainty on monetary policy during potentially difficult Brexit negotiations. However, it also means that we will continue to have a relatively dovish BoE which points to a weaker sterling. With respect to its meeting on Thursday, most analysts expect the BoE to stay on hold. That said, the BoE is likely to maintain its easing bias, and state that it stands ready to ease further if needed to support the economy. This morning, UK PMI manufacturing is expected to fall slightly in October after a sharp increase in August and September.

Euro

EUR/USD traded with a heavy tone on Monday, which is likely to continue heading into the Fed decision on Wednesday. We can expect the Fed to keep rates unchanged and with the market pricing in more than a 70% probability of a December hike, we can expect limited impact on EUR/USD on the back of the Fed’s decision. In the Scandinavian region, EUR/SEK is consolidating after recent volatility.

USD

The U.S Dollar remained quite firm against most majors last week. We saw better than expected GDP figures which provided some uplift, and it was encouraging to see that Q3 annualized GDP figures were more than double that of the Q2 figure. The strong GDP data supports the argument for a U.S rate hike towards the end of the year.

The focus this week for the U.S Dollar is on the Non-Farm employment data on Friday. We have a busy week ahead for the U.S which includes U.S Manufacturing data earlier on in the week and unemployment data towards the end of the week.

GBP

Even after some very positive data for the pound last week, Sterling strength was short lived, and we saw the pound fall towards the lower end of its recent range against most majors. Car maker Nissan announced that it intended to expand its Sunderland plant after the government had given it adequate “support and assurances.” That being said, the pound still didn’t manage to hold its temporary gains against the U.S Dollar or the Euro. Nissan’s decision was later discussed with speculation that the government may be willing to pay the company’s EU – imposed tariffs when the time comes.

While we have some important PMI data earlier on in the week, the focus for Sterling is the inflation report, MPC rate vote, and Monetary Policy Summary on Thursday.

Euro

The Euro saw the pound make some ground against it last week after a spell of strong UK data. The Sterling strength, however, was short-lived, and the Euro regained any ground it lost to Sterling. Last week, French GDP showed slow growth, but growth nonetheless and Eurozone confidence indicators improved in October. Some fluctuations in the Euro strength were seen when there were problems in signing the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU. This was later resolved, and the deal was agreed. This caused the Euro to make strong gains on the U.S Dollar.

The focus for the EURO is in German retail sales data earlier on in the week and the PMI readings that are to be released on Friday.

USD - CAD

The dollar is trading close to a three-month high against the yen, underpinned by higher US bond yields and growing expectations that the US Fed will raise interest rates by the end of the year. The market is now pricing in a 74% chance that the Fed will raise rates at its December meeting, according to CME Group, following a series of hawkish comments from Fed policymakers. Those expectations have driven the dollar to nine-month highs against a basket of currencies this week. With the Bank of Japan seen likely to keep its monetary policy steady for a while and to stick to its pledge to guide 10-year government bond yields around zero percent, US bond yields will be the main driver for dollar/yen for the time being. The oil market has started to question a forthcoming OPEC deal to cut output which has led oil prices to drop back. The Brent crude price fell below $50/bbl yesterday as the oil market continued to question whether there would be an OPEC deal to cut output when the cartel meets on Nov. 30. Scandinavian markets will focus on the monetary policy meetings in Norway and Sweden today.

GBP

UK GDP data is due this morning - the first estimate of UK growth in Q3. Economic data in Q3 has been much better than most analysts feared and expected. Traders look for GDP growth in the range 0.3-0.5% q/q, with 0.4% being the consensus estimate, driven mainly by services. This is slower than before the EU vote (Q2 growth was 0.7%) but still a solid growth rate from a global perspective. A decent result this morning would further diminish the chance of a fresh interest rate cut by the Bank of England next week. Most economists do not expect the BoE to ease policy until early 2017. Finance minister Philip Hammond will also pay close attention to today's figures. He is due to announce his first budget plans on Nov. 23 and has suggested he could approve higher levels of public spending if necessary to help the economy cope with the Brexit slowdown.

Euro

Figures this morning showed Deutsche Bank unexpectedly returned to profit in the third quarter as CEO John Cryan continued to lower costs and the securities unit reported a jump in revenue. Net income was 256 million euros the Frankfurt-based lender said. Most analysts had forecast a loss. Trading revenue rose 10%, driven by debt and currencies, the biggest source of income, also beating estimates. Cryan, 55, has struggled to stem a slide in shares and maintain client confidence after the US Department of Justice’s requested $14 billion to settle a probe into faulty securities. Cryan told staff the “situation would remain tough for some time to come,” with the lender “working hard on achieving a resolution” with US authorities.

USD
The US Dollar came close to hitting its nine-month high only to retreat as investor’s cast doubt on if the FED will raise interest rates this December. The Fed needs all the positive data it can get to hike rates in December and yet again first tier data let them down. This time it was US consumer confidence that fell from last month’s reading of 103.5 to 98.6 as people saw weak wage rises combined with rising health care costs to come. This morning we have USD Trade Balance, Wholesale Inventories, New Home Sales and Crude Oil Inventories and all these numbers have to come in above the forecast to show confidence to increase interest rates this December. If these numbers miss even just a little, we could see a US dollar dip indicating a great time to buy. No major Canadian news out today.

GBP
As previously in recent history when BoE Governor Carney has spoken the pound has fallen, the market sold Sterling before he testified to Parliament yesterday afternoon. There actually was a bounce in the pound after he spoke as he said that Sterling’s fall would “undoubtedly” be on the agenda next week at the MPC meeting, with the inference being that although the pounds post-Brexit fall does have some benefits for the UK economy, to see the pound in freefall is not desirable. The bounce in GBPUSD was helped by poor US data as well, but it has not held its gains and has slipped back overnight.

Euro
ECB President Draghi said that ultra-low rates do have rising costs and then yet again asked EU Governments to provide fiscal stimulus for the Eurozone. In the background, Germanys Finance Minister Schaeuble was saying that monetary policy had reached its limits with the market interpreting these comments as a reason to pause EUR sales and as such strengthened against the USD and GBP. Overnight EUR trading was quiet, and there isn’t any economic data due for release today so other currency themes may well move the single currency.

USD
Although Clinton is well ahead in the polls, it is worth noting that in 1980 a Gallup poll had Jimmy Carter leading Ronald Reagan 47 to 39 with Reagan, of course, having a landslide victory. The market is currently pricing in a Clinton victory, so if Trump is elected, there may be some extreme volatility. Against this backdrop, the Dollar is grinding higher pretty much across the board, and US consumer confidence is due for release this afternoon.

CAD
The Loonie was a touch soft as Iraq asked for an exemption to the proposed November production cut deal. It seems like Opec has similar troubles to the EU when trying to get agreement amongst its members. BoC Governor Poloz said that the US and Canadian economic and monetary policies could diverge while a further Canadian rate cut would bring unconventional tools closer. The implication being more easing for Canada.

GBP
Quite a range bound for once today and waiting for BoE Governor Carneys Testament in front of parliament today. Carney starts talking at 3:35 pm UK time and is scheduled to discuss the consequences of the Brexit vote. Next week the MPC will meet to decide whether or not the UK economy needs another interest rate cut. Scotland’s First Minister Nicola Sturgeon has been vocal in her thoughts on Brexit and another referendum. At the moment her views are not unsettling the market, particularly as it is far from certain if she will be given the opportunity to give Scotland another independence referendum.

Euro
Eurozone Services Purchasing managers index (PMI) at 53.5 was better than the expected at 52.4 and last month’s 52.2. Unfortunately, the data wasn’t good enough to move the market higher when taken together with the latest news on the EU-Canadian trade agreement. The Wallonian parliament (Belgian regional) would not ratify the EU-Canadian trade deal, but the European ministers for foreign trade are exploring the possibility of not subjecting certain parts of the agreement to unanimous ratification by all member states. As in the case of Greece, when the EU wants to fudge something it will. German IFO business confidence is due for release today and may be important after yesterday’s positive German PMI surveys. ECB President Draghi will talk after Carney today so GBPEUR may have a busy afternoon.

USD

The US dollar is still trading at its eighth month high, and with Donald Trump now trailing Hillary Clinton by up to 12 points in some presidential election polls, the market can put more focus on when the Federal Reserve will hike US interest rates in December or not. The probability of a December rate hike is currently 67%, and this will induce Dollar buyers for at least the short term. We have the release of Durable Goods and GDP at the end of this week.

CAD

Canadian wholesales numbers came in better than expected 0.8% over 0.2%, couldn’t quite get a full percent. Governor Poloz is due to testify, along with Senior Deputy Governor Carolyn Wilkins before the House of Commons Standing Committee on Finance, in Ottawa later this afternoon.

GBP

Held steady in the morning but couldn’t hold on all day as sentiment again turned negative on Brexit fears. Sterling weakness was also encouraged after BoE Governor Carney was heavily criticized by MP Michael Gove. Considering the BoE Governor was the only man standing after Brexit while the Brexiteers (Gove included) either imploded or ran away if Carney did leave the BoE it would not be positive for Sterling. This week sees the month end and not a huge amount of data, but holders of Sterling will be nervous as there is still a lot of negative sentiment towards the pound in the market. On the other hand, we do have the release of UK GDP on Thursday, and early estimates are for a rise of 0.3% for the last quarter. This is still quite healthy, and if the number is seen as positive, it could see sterling buyers enter the market. As for the legal challenge to Brexit the law Courts have advised that they “shall take the time to consider the matter and give our judgments as quickly as possible”. This isn’t helpful to traders who were hoping for a verdict last week, but it does induce headline watching.

Euro

The Euro has now fallen 3 weeks in a row against the Dollar with the market now pinning these declines on the divergent interest rate paths of the EU and US. The main event last week was the ECB meeting and press conference from Mario Draghi which has been interpreted as indicating that QE (quantitative easing) will be extended in December. Good news for the Euro comes in the possible formation of a Government for Spain while on the negative side, the EU-Canadian trade agreement is in danger of collapsing as it is held to ransom by the Belgian region of Wallonia. Wallonia is the French-speaking region of southern Belgium and currently does not want to agree to the aforementioned trade agreement. One reason being to safeguard the trade tariffs levied by Europe on milk imports that supports the Wallonian dairy farmers where there is 1 cow to every 3 people. If this EU-Canadian trade agreement can be derailed by a small Belgian state there are two implications; That the EU is exceptionally cumbersome and unwieldy and that this does not augur well for a simple and efficient Brexit agreement between the EU and UK within the two-year timeframe.

CAD

Canada had a busy day yesterday with the Bank of Canada news. As expected the benchmark rate stayed unchanged at 0.50% and the statement released highlighted both the housing market and oil prices as the primary risks for Canada. They highlighted however even with this risk they still expect growth for Canada. They Bank also highlighted that growth potential would be lower than projected in July’s Monetary Policy Report. The market took this as all expected news, and we saw CAD strengthen and test the 1.30 level with USD. This gain was temporary, however, as during Poloz press conference it was revealed the Bank of Canada had actively discussed more stimulus likely in the form of a rate cut. This language quickly pushed CAD back up and we may test 1.33 sooner rather than later. Eyes now go to the CPI report for Canada tomorrow. As always, a market order might help you capitalize on any unexpected movement, feel free to call or email to discuss more.

USD

The last of the TV debates between Hillary Clinton and Donald Trump took place last night with the main point not being about economic or social policy but instead Trump’s refusal to answer whether he would accept the election result or not. Currently, Clinton leads by about 7 points in the polls and as such is expected to be installed in the White House. On the US interest rate debate, NY Fed Governor Dudley said that he sees a rate hike this year if the economy stays on trajectory.

GBP
UK average earnings pointed to a slight increase for the UK worker and as such sterling got a leg up. GBPUSD stalled at technical levels and fell back later despite Chancellor Hammond testifying to Parliament that the City is a high priority for the Government. It still appears that the UK will lose access to the single market along with passporting rights and this is negative for sterling. Talks of equivalence of standards being a possibility for the City are being discussed as a possible alternative but early investigations indicate that this would be a poor replacement for passporting. UK retail sales will show what the UK shopper has been doing over the past month.

Euro
With the ECB meeting today being the market's main focus the Euro has been slipping lower against the Dollar and also the Pound over the past 48 hours or so. Analysts expect no change to interest rates and ECB President Draghi’s press conference will probably be the highlight as he answers questions over the direction of QE. Analysts have been suggesting either tapering or more stimulus with the most probable outcome being the ECB taking a neutral line this month and then changing their view when they produce their new forecasts in December. We also have Swedish employment data for release at 08:30 am UK time.
 

CAD
A big news day for Canada as we have the Bank of Canada rate announcement this morning. Markets are expecting no change but with both a press conference and Governor Poloz speaking today the market will be listening closely for any change in language as a nod towards any future decisions. Also today is Crude Oil Inventories out of the US, with the damage from the wildfires in Alberta beginning to stabilize and production expecting to ramp up, a wayward number here may recouple CAD with oil prices. This is after the last couple months of OPEC announcements have seen them act more independently. Given all the news today for Canada, it’s a good time to put in a market order to capitalize on any sudden movements in the market.

USD
The market likes clarity and as such it would have been helpful if US CPI had been strong and hence given the Fed reason to hike rates in December. Unfortunately, it was only as expected with core CPI actually falling below expectations of 0.2% and coming in at 0.1%. The Dollar slipped against sterling and commonwealth currencies but gained against the Euro. This morning Building Permits for the US came out slightly beating expectations. This won’t shift the needle too much, expect US to hold steady until other news. Tonight we have the last of the TV debates between Clinton and Trump and it is interesting to note that Trump has already started to claim that the election will be rigged against him. UK bookmaker Paddy Power has already started to pay out on bets placed on Hillary Clinton, let’s see if Trump and the bookmaker are correct.

GBP
UK CPI YoY jumped to 1% from +0.6% and the highest since November 2014. The normal response by a central bank is to consider raising interest rates to choke off inflation but of course we are not in normal times and the BoE will probably look through this rise to leave interest rates unchanged. UK Govt. lawyer Parl commented that it is very likely that MP’s will have to ratify any agreement between the EU and UK when the UK exits and this combination of inflation and legal news helped the pound squeeze higher. We have UK average earnings data due for release this morning for direction.

USD -CAD

The US Dollar Slipped lower against the majors as yesterday's US economic data came in lower than expected. Last Friday Fed Chair Yellen maintained her dovish stance and said that the Fed could run the US economy slightly hot, implying that US rates would not be hiked quickly. Interestingly this was countered by Fed Vice Chair Fischer yesterday who pointed out the risks to this approach and said that the Fed was “very close” to its employment and inflation goals. Sometimes it could be said that there is too much guidance from the Fed! US CPI is released later today. It seems as though foreigns are attracted to more than just Vancouver and Toronto houses as the amount of foreign securities purchased mostly in Canadian bonds last month comes in at a whopping 12.74 Billion over an expected 6.24 Billion.” Foreign acquisitions of Canadian bonds totalled $9.0 billion in August and were mainly secondary market purchases. On a sector basis, foreign acquisitions of corporate bonds were $6.9 billion, almost evenly split between government business enterprise bonds and private corporate bonds.” StatCan.gc.ca”

GBP

Sterling was sold again after BoE’s Broadbent commented that “having a flexible currency was very important”, the implication being that sterling’s fall will act as a counter balance and help stimulate the UK economy against the slowdown seen after the Brexit shock. This weighed upon the pound all day although in truth there wasn’t much movement. The market is keeping one eye on the law courts for its decision on whether parliament needs to vote on Brexit and as often happens in Law the process is running over and we now only have the legal arguments being concluded tomorrow morning with no clear indication of the timing of a decision as yet. In this case, the market's focus will now turn on to UK inflation due out this morning. Analysts expect an increase here but whereas this could have seen expectations of interest rate tightening, the BoE has already said that it will look through Brexit induced inflation.

Euro

Eurozone final September inflation came in as expected at +0.4% and had little effect with the equity markets being soft and as such although last week the Euro slipped lower yesterday it bounced back into recent ranges.

USD

The Dollar strengthened last week on the back of firming interest rates which along with poor Chinese trade data pressured the Commonwealth currencies. The Bank of Canada also meets Wednesday and is expected not to change interest rates. Last week the Fed’s meeting minutes showed that the Fed nearly hiked US rates in September. This points to a rate rise in either November or December and with the presidential election in November that makes December favourite with a 66% probability of a rate hike. On the political front, it seems like the media have found Donald Trump’s Achilles heel with not only his chauvinistic approach to women but also his physical behaviour with women. If the polls are to be believed as long as Hillary Clinton keeps away from true drama or scandal, she will be the first female president of the USA. We have US CPI on Tuesday on the economic front.

GBP

The spotlight is still on the Pound and Brexit. After the flash crash, the market paused for breath last week as there was a lack of economic data. The main theme for Brexit was the legal challenge to the Govt. which if it succeeds will force PM May to let parliament vote on Brexit rather than just debate it (as they are currently doing).The verdict is due today although it will certainly go to appeal. The expectation is that the appeal will be considered and final decision occurs before the end of the year. If the initial decision goes against the Govt. the market could interpret this as parliament being able to force the UK to seek a soft Brexit. Additional event risk for the pound takes shape in the form of Scotland’s First Minister Nicola Sturgeon’s push for another independence referendum, although she needs the approval of Westminster for this, her plans for independence will not be positive for UK sentiment. We have UK inflation and employment data due Tuesday and Wednesday.

Euro

The Euro slipped lower last week pushed by interest rate diversion between Germany and the US. It had previously been creeping higher on market analysts theorising that the ECB could start tapering its QE, but this has been denied. We have the ECB meeting on Thursday this week although no change is expected and probably not even a hint or discussion about if/when QE could be tapered.

USD
It’s a busy morning for US data today as retail sales numbers are due out at 8:30 as well as PPI numbers. After that, we have the University of Michigan’s consumer sentiment at 10:00. Finally, we have Fed Chair Janet Yellen speaking this afternoon at 1:30. With the minute's release this week we saw more members leaning towards a rate hike then before, so all eyes will be on Yellen to see if she uses any language to signal a hike before the year’s end. Given the election, it’s unlikely to happen before December, with most investors putting the probability of a hike in December around 60%

CAD
After touching 1.33 against USD earlier this week, we’ve seen Canada strengthen overnight to below 1.32 this morning. There’s no Canadian data this morning, and gains were tied to a rise in oil prices as well as some gains in the equity market. This is despite that we’ve seen CAD decouple with oil prices over the last several months, where gains in oil haven’t been reflected in the Canadian dollar.

GBP
The row between Unilever and Tesco is evidence that import prices are already rising for the UK. The recent increase in petrol prices is another example of inflation picking up but with the BoE focusing on keeping the UK out of recession there is a minimal chance of a UK rate rise anytime soon. For those who want access to the single market to be the main focus of the Brexit negotiations, an Ipsos Mori poll released yesterday showed that the UK is the country most worried about immigration and extremism out of a basket of 25 countries around the world. This would support the Governments current view that a migration cap is what is required from Brexit. A legal challenge to Brexit started yesterday. The court process may take until the end of this year to give its verdict on whether the Govt. can trigger Article 50 or not. It is unlikely that the Govt. will lose the court case but if it does then it will have to allow a vote on Brexit by Parliament. If the Govt. then loses the parliamentary vote there will be a constitutional crisis as parliament will have voted against the electorate. This path is unlikely but of course won’t be good for sterling. On a brighter note, the Dutch bank ING is moving bankers from Amsterdam to London, this move flies in the face of current thinking and ING commented that London remains a hub for financial trading in spite of the UK’s vote to leave the European Union. Look out for comments from BoE MPC member Forbes and Governor Carney today.

USD
The market continued to cautiously buy Dollars yesterday as they expected some hawkish sentiment from the release of the FOMC minutes. The minutes did show that it was a close call on whether to hike rates or not and the market now gives a 67% probability of a US rate hike in December. This encouraged Dollar purchases although overnight the Chinese trade data was very disappointing with exports dropping the most since February. Last December the Fed told the market that it was going to keep raising rates and was blown off course after huge Chinese stock market falls. With the poor Chinese trade data just received showing a slowdown in global trade the market immediately lowers Fed rate hike expectations and as such the Dollar softened with USDJPY, in particular, taking a tumble.

GBP
After a headlong dash lower over the past 4 days or so the pound paused for breath on the news that UK Parliament would debate Brexit. PM May promised parliament that she would push for maximum access to the common market for the UK and a German Govt. spokesman timely reminded her that Angela Merkel has always stressed that British access to the EU common market requires acceptance of freedom movement of people. Put simply, if we want to cap immigration from the EU we will not have unfettered access to the EU’s single market which includes pass porting for the City. In this case, Sterling produced a classic “dead cat bounce” driven by still negative sentiment over Brexit and helped by the FOMC minutes which showed the Fed nearly hiked interest rates in September. Look out for more comments from Parliament as they debate Brexit.

Euro
The market has been very much focusing on the widening interest rate differentials between Germany and the US. The two-year rates differential was now 154 basis points and the highest level in 10 years. We actually managed to get some movement in EURUSD which did come lower, but we are still within ranges that have held since June.

USD
The dollar stayed firm across the board today after a relatively data light Tuesday. That continues today however it’s fed speaker day as Fed members William Dudley and Esther George both are set to speak this morning. This is followed by the Fed’s meeting minutes being released today at 2:00. Markets will be listening to see if there’s finally the move towards a rate hike in December, last meeting saw three members looking to raise rates. Finally, on the election front after a rough week in the polls and having seen a large number of his party back away from him Donald Trump has said ‘the shackles have been taken off me’. If he was holding back before we might be in for a very interesting last month of this race.

GBP
The pound strengthened close to 1% against the US dollar after a motion in Parliament shifted the influence to give MPs more power over the Brexit plan and may signal a shift away from the hard Brexit that was expected. The motion is non-binding but will weaken the PM’s position at the bargaining table, and expectations are it will move away from that hard Brexit that May had been advocating. The Times reported that the UK could potentially lose £66 billion a year under a hard Brexit.

Euro
German ZEW economic sentiment reading was an excellent 6.2 and way above September’s reading of 0.5. however the data was promptly ignored and the Euro slipped lower against the Dollar as it focused on US interest rates squeezing higher. The Euro fell against the Dollar as the market started to focus on the release of the last Fed meeting minutes. US rates are creeping higher and encouraging Dollar strength.

For the longer term future of the Euro at a time when various European centres are vying for London bankers business it seems a strange move that the EU should push ahead with plans for a Tobin tax. The four largest Eurozone members, Germany, France, Spain and Italy are aiming to introduce this tax by the end of 2016.

USD - CAD

The market discussed at length the latest presidential debate and had a 78% probability that Clinton will be the next US president. Certainly with Republican House speaker Ryan dropping support for Trump the elite is very much against him. Trump does have many voters behind him as they like his stance on migration and jobs. This could be much like Brexit in the UK with many voters only concerned with immigration. If this turns out to be the case, the markets will be wrong-footed especially as Clinton currently has a 14 point lead over Trump in some polls.

This morning Canadian Home Sales came in at 221K over a forecasted 194K showing no slowdown anytime soon.

GBP

Still had a hangover after last week’s volatility and although trading was quite quiet it did slip lower. There were voices of discontent amongst rank and file MP’s as the Govt. dismissed the chance of a parliamentary vote on Brexit and there is an early story in the Times newspaper that a hard Brexit will cost the UK economy £66 billion. No UK data due for release today but we do have the newest member of the MPC ex-Citi banker Saunders in front of the Treasury Select Committee this morning.

Euro

Back in the doldrums and not doing a lot with the US enjoying a Columbus day holiday and Deutsche Bank (DB) being the main headline story. The DB stock price was volatile on headlines that announced firstly the bank had been given preferential treatment in the EU bank stress tests earlier this year and then that Chief Executive John Cryan returned from the US without an agreement on a lower fine from the Dept. of Justice.

GBP
The pound is the major news maker this morning as a flash crash yesterday saw GBPUSD drop 10% in a matter of minutes. This came after remarks from the French President Hollande who was looking for tough negotiations over Brexit. The number recovered quickly and at this point there’s ranging reports of how bad GBPUSD got, with some reporting as low as 1.1368. Regardless of the exact number, it’s yet another new low for the Sterling since 1985. The crash was a brief one as it was largely triggered by computer trading algorithms and quickly recovered. Given the volatility in GBP now is a very good time to put in a market order with your relationship manager to be able to capitalize on these movements, as they may not last long. Long term HSBC has set it’s forecast for GBPUSD to hit 1.10 and GBPEUR to his 1.10 by the end of 2017.

USD
Dollar fell significantly this morning after job numbers came in below expectations. Coupled with a strong number for Canada and the unemployment rate ticking up to 5.0% The average hourly earnings increased at 0.3 around expectations. Given the tick up in unemployment rate it may be harder for the Fed to justify increased rates until the new year. This afternoon several Fed speakers will be making speeches, which may have an effect before the weekend.

CAD
While the focus was on USD, Canada came out with very strong numbers, an increase of 67.2K against 8.5K expectations. This caused CAD to shoot up across the board, though we still haven’t broken through any recent highs. This is the most employment gains since 2012, and may signal a move to increase rates from the Bank of Canada. Unemployment stayed steady at 7.0% and average hourly earnings of permanent employees rose 1.6%. Most of the jobs were part time, however there was an increase in 23,000 full time jobs, a strong improvement. Trudeau is speaking this morning about jobs, if a new program is being implemented we may see an effect on markets.

USD
The dollar has moved close to a two month against major currencies this morning as expectations increase for a rate hike in December by the FED. The big number to watch is tomorrow with Non-Farm Employment numbers being released, as always these are closely watched by markets, and expectations are currently for a 171K increase. Markets will be keeping an eye on some of the details of the report, specifically to see if average earnings stay steady or increase, if so that should move USD stronger. This morning Unemployment Claims beat expectations with a loss of 249K against 255K expected. This signals a good chance tomorrows unemployment numbers could be strong.

CAD
Building Permits came in this morning for Canada well above expectations – an increase of 10.4% against 1.1%. This won’t move markets much as eyes are on tomorrow’s employment numbers from both Canada and the US. Economists are expecting modest growth in employment out of Canada with an increase of 8.5K, and for the Unemployment Rate to hold steady at 7.0%. Oil has continued to climb and is nearing $50, the highest since June. Despite this increase commodity currencies like CAD and NOK have actually been falling, we might be seeing a decreased focus on oil for these currencies moving forward.

GBP
GBP recovered slightly after falling below 1.27 for the first time since 1985 and hitting 5-year lows against EUR. This all related to fears surrounding the Brexit and that the leave might be harder than initially expected. Manufacturing Production are due in tomorrow morning for GBP, but fears around Brexit will continue to be the main mover for the currency, with most economic releases only causing small ripples relative to the event.

USD - CAD

The Dollar was up pretty much across the board as it priced in an increased chance of a Fed rate hike this December to 50%. The USD to CAD is following a head and shoulders pattern for the last two weeks, out today we have key US data including trade balance, ISM Non-Manufacturing, Factory orders which will all be factors that you can bet members of the FED will watch to cue a possible hike in December. As oil sees an increase in its price due to some environmental and geopolitical issues, it will be important to watch the USD Crude oil inventories due out at 10:30 this morning. Oil Inventories are expected to be much better than the previous month, meaning even a slightly less than positive number could result in the drop in USD and a rise in CAD. Rate order time.

GBP

GBPUSD and GBPEUR were sold again yesterday as the market is coming to think that the UK Govt. is happy to give up access to the single market in return for a cap on migration. This negative sentiment saw GBPUSD make new 35 year lows and was despite yet another good PMI reading. Yesterday it was construction PMI that came in at 52.3 and showed expansion against last month’s 49.2 contractions, above or below 50 means expansion or contraction. In the Equity markets the combination of a weaker sterling, the prospect of an easing BoE and positive PMI readings gave the FTSE 100 and 250 a big push higher. Early afternoon we heard the Minister for Brexit David Davis give hope to bulls by saying that Brexit success means “an unfettered trade relationship with Europe and a freer one with the rest of the world”. This was countered by BoE Saunders who said that he sees substantial scope for more QE if needed. All in all, it seems like the UK Govt. is happy with hard Brexit and the market is currently reprising sterling to account for this. We have Services PMI for release this morning, but in the current market with such negative sentiment around even if it is a positive number, it is hard to see sterling bounce very far.

Euro

The Euro did move initially lower against the Dollar as it managed to follow sterling’s move for once. However, the Euro bounced later in the day after hearing recent ECB comments that have been interpreted as helping the banks and possibly bringing an end to ultra-easy money from the ECB. When ECB President Mario Draghi said that he would “do whatever it takes” to save the Euro, the market interpreted this as easy money forever and indeed the ECB has introduced negative interest rates. Negative rates have been damaging to the European banking system (putting, even more, pressure on Deutsche Bank) and as such market analysts are now looking to a possibility that the ECB could start to taper or end its QE policy. This could be the spark that ignites the Euro and manages to move us out of the recent Euro doldrums.

USD - CAD
The USD Climbs to a two-week high as investors move from the pound and other majors into the greenback on strong US data. BOJ Governor Kuroda spoke early London trading promising more easing if needed although he added that he did expect Japanese wages and prices to start rising. The Dollar took notice of this and pushed higher especially after US Manufacturing ISM PMI data was slightly above expectations at 51.5 with the Dollar index gaining overall (i.e. the Dollar strengthened across the board). Canada has no major news out today as we wait for tomorrow's trade balance numbers.

GBP
UK Prime Minister May had given the market a reason to sell sterling with her “Article 50 will be triggered by the end of March 2017” announcement but the decline was stalled by excellent Manufacturing PMI data for September which came in at 55.4, a nice jump from last month’s 53.4 and the highest since 2014. This jump higher was attributed to sterling’s post-Brexit slump boosting a surge in export orders. In the afternoon it was revealing to hear UK Member of Parliament Rees-Mogg say that “the World is our oyster, the European market is a rotten shrimp”. He continued that there was no need in his opinion for the banks to concern themselves about passporting and as such this points to a hard rather than soft Brexit. This talk of hard Brexit sentiment, of course, puts pressure on sterling and early this morning UK PM May again fired the starting gun for sterling sellers by saying that the “Brexit process will not be plain sailing for the economy”. This has seen GBPUSD fall through the post-Brexit low and makes a new 35 year low. We have UK construction PMI for release today, but with sentiment so negative towards Sterling the market will look to sell on any rally.

Euro
The Hungarian referendum had an amazing 98% of voters saying “no” to EU migrant quotas. However, the result can only be declared valid if voter turnout exceeds 50% and as such latest reports suggested only 45% of eligible voters had done so. Regardless of this, it is a result that points to a denouncement of the EU migrant policy. Eurozone PMI readings were broad as expected and yet again the Euro was range bound against the Dollar.

CAD
GDP for CAD beat expectations this morning with a 0.5% increase over an expected 0.3%. This is a slight reduction from last month’s 0.6 and backed largely by a faster than expected increase in production after the Alberta wildfires. Manufacturing rose 0.4% with oil. A miss would’ve caused a significant drop, however, with fears increasing around the equity markets with Deutsche Bank shares hitting new lows, CAD has been overshadowed, and the move been relatively minor so far.

USD
There’s no major news releases due out, but a few smaller numbers – Personal Spending and Chicago PMI among them. USD has strengthened against most currencies as risk appetite seems to be shrinking. This is after the news from Europe that Deutsche Bank may not be as secure as expected. The bank's stock dropped close to 5% after reports major hedge fund clients are reducing their exposure to the largest bank in Germany. This is a new low for the stock and is increasing fears in the equity markets.

GBP/EUR
The pound weakened despite strong Current Account and GDP numbers released yesterday, next week has major manufacturing numbers for GBP which might give a case for some strengthening. The EUR index has weakened close to .3% also on the Deutsche Bank news.

USD - CAD
The US dollar is up slightly against the majors this morning as US data continues to come in slightly better than expected. We will see if this trend continues this morning as we have US manufacturing and total vehicle sales out later this morning. In Canada, we have RBC Manufacturing PMI due out which is expected to be relatively unchanged from previous months.

In other news, the Chinese Yuan or RMB has joined the IMF currency basket. “The inclusion into the SDR is a milestone in the internationalization of the renminbi, and is an affirmation of the success of China’s economic development and results of the reform and opening up of the financial sector,” the People’s Bank of China said in a statement. More here: http://www.imf.org/en/News/Articles/2016/09/29/AM16-NA093016IMF-Adds-Chinese-Renminbi-to-Special-Drawing-Rights-Basket

GBP
Data last week was starting to give the general impression that the UK economy was managing to adjust fairly well to the Brexit vote. Final GDP for Q2 was 0.7%, 0.1% better than expected with this reading being for a time when business was supposed to be slowing down for the actual vote. The UK current account for this period was also not as bad as feared and business investment was 1.0% and an improvement on the previous quarter's 0.5%. In addition to this, the Confederation of British Industry (CBI) is now expecting an autumn surge in activity for UK firms. This is leading some analysts to only put the probability of another UK rate cut at 33% rather than the 75% suggested some six weeks or so ago. So it was starting to look like sterling could hold its ground for a time, until PM Theresa May announced on Sunday that Article 50 would be triggered before the end of March 2017. This has made sterling gap lower at the markets open with the likelihood of any weak data from this week’s PMI releases pushing the pound lower. Some analysts see the PM’s announcement as removing uncertainty and so should be supportive for sterling. Let’s see.

Euro
The big news last week was, of course, the Deutsche Bank (DB) share price fall, but we did see a rally late on Friday as the news hit the market that DB would probably only be fined by the US Dept of Justice $5.4 billion rather than the $14 billion initially suggested. This helped the Euro and the Equity markets bounce into Friday’s close with recent ranges, in particular, holding for the EURUSD.

CAD
CAD strengthened across the board yesterday after news from OPEC strengthened the outlook for oil. It was the only news item for CAD all week until tomorrow’s GDP number. OPEC announced it was looking to reduce output by approximately 33 million barrels per day, the first such agreement since 2008. Some analysts have remained skeptical that they’ll follow through as details are limited.

USD
USD strengthened this morning against most currencies after both a positive GDP release and unemployment claims beating expectations. GDP rose 1.4% beating the 1.3% expectations, while unemployment claims came at 254K better than the 260K expected. Both were minor beats but followed Yellen’s testimony yesterday that if job creation continued the FED might be forced to raise interest rates faster than expected. Given they claimed to expect raising rates this year, they’re running out of time to act. Yellen speaks again today at 4:00.

GBP
The pound has continued to fall against USD despite some positive releases lately as the market has been dictated more by USD strength. Britain has a trade balance report coming across in the form of their Current Account release tomorrow morning. Economists are expecting a -30.5B balance a slight improvement from the previous quarter. The pound is likely to continue to be dictated by US markets for the most part, but this release could cause a shift if Britain misses.

USD - CAD

The US Dollar is up as consumer confidence was a very pleasing 104.1 and nicely above the expected 98.6. This helped the Dollar against the Euro but not so much against the pound or Yen. The biggest mover was USDMXN which has been bought aggressively as the prospects of a Trump Presidency were building. As the market considered that Hillary Clinton did win the TV debate, USDMXN lost nearly 3%. It will be interesting to see if US durable goods carries on the positive data today. The recent oil price rise had helped the Loonie higher, but as soon as Iran stated that its aim was to pump 4 million barrels of oil per day, it came off with the oil price. The AUD has managed to stay firm recently as the market considers that the Reserve Bank of Australia is on hold for the time being, and its peer group have an easier monetary policy.

GBP

We waited patiently for Liam Fox’s speech to the World Trade Organisation and waited and waited… Until it was reported in the Bournemouth Echo (a provincial newspaper) that instead of explaining how a hard Brexit would work, the International Trade Minister waffled on about not very much. The market was disappointed by this and Instead to amuse itself found an interview with the ex UK Chancellor Osborne who suggested that Article 50 may not be triggered until after the German election. Strange…The pound squeezed higher and was helped by Euro sellers who were negative towards the Euro because of the Deutsche Bank share price fall. Overnight BoE Governor Carney commented that the UK economy was performing as expected but business investment and real estate market is softening.

Euro

The Euro finally had some movement as it followed the Deutsche Bank price lower. Deutsche bank may be under pressure, but it does have some defence against negative sentiment. As of last December, the bank had enough liquid assets to cover total net cash outflows over more than a 30 day stressed period. It also has Euros 10 billion of subordinated and hybrid debt that could be converted to equity and has raised capital since the end of last year as well.

USD

Equity markets were nervous in advance of the US Presidential debate, and the Yen strengthened as well. An early CNN poll reported that 62% of those asked thought Clinton won the debate, she had managed to maintain her poise whereas it was reported that Trump had begun to rant at times. Voters will be nervous of voting a President in who is prone to fits of ill temper when the have their finger on the nuclear button. The market has since been in a quiet risk on mood with the Dollar subsequently softening a touch.

GBP

UK Mortgage Approvals at 36,977 were the lowest since Jan 2015, and the market pressured sterling again. Data from the Chicago-based CME showed last week that leveraged accounts (speculators) bought a substantial amount of Sterling. The net buying was approximately £1.8 billion and as such, the market does not have such a large oversold position as previously this month. Positive data from the mergers and acquisitions market showed that the UK had done well in this space since the referendum with some 121 inbound deals worth some £38 billion. The UK has a poor current account position and inward deals of this size need to continue to keep the UK economy holding up. Today’s main event is the speech by Liam Fox the International Trade Secretary if it points to the UK having a “hard Brexit” the pound will suffer.

Euro

The IMF announced that Swiss GDP was growing by1.5% this year and projected 1.75% growth over the medium term as well as inflation back to zero by year end. So positive news for the Swiss Franc which did strengthen against the Dollar and the Pound, although the projections were accompanied by SNB’s Moser who said that they could lower interest rates further into negative territory if needed. Deutsche Bank shares fell again after it was rumoured that Angela Merkel had said that there would not be a Govt. bailout for the suffering German lender. Overall, though, this news should be expected, after all, if the Italian banks can’t get State help why a German bank should?

ECB President Draghi merely stated that the UK could not have access to the single market if it has a cap on migration.

USD

So the Fed held rates steady, threatened to raise rates at least once this year and then produced an economic outlook that wasn’t very positive for GDP or inflation. As such the market has yet again been disappointed by the Fed and its credibility is certainly questionable. Does the Fed know what it is doing or how it is going to help produce a platform for sustained growth for the US economy and combine this with improved employment levels? Canadian Core CPI and Core Retail Sales are expected to be more positive this month then last if this isn’t the case the Loonie could slide lower.

GBP

With the Fed adopting its usual position of "we will raise rates this year unless we won't" the Dollar was soft against the Pound yesterday. The Sterling market is starting to look at the Chancellors Autumn Statement due on Nov 23, and certainly, the BoE Governor Carney will be unable to stimulate the economy through the next 30 months or so on his own. In this case, GBPUSD again squeezed higher only to fall back later in the day.

Euro

Slow and steady does it the Euro managed to strengthen against a soft Dollar but not at any pace. ECB President Draghi has been defending his negative interest rate policy and asking for more help from the EU governments to stimulate the economy. The issue is that there are 28 separate Governments who have to work together to reform, and this is proving difficult. The Flash Services PMI reading released today will give us the latest update on the European economy this morning.

USD

The Fed kept rates on hold last night between 0.25 and 0.5%. This was in line with market expectations but while the Fed strongly signalled that it could still raise rates by the end of the year, policymakers forecast a less aggressive rise in interest rates next year, according to the median projection of forecasts released with its post-meeting statement. Therefore the market interpreted the Fed communication as slightly dovish and the dollar has weakened overnight. However, with the BoE possibly cutting rates again in November and the Fed seen as a 60% chance to raise rates in December.

GBP

Sterling climbed against the dollar overnight after the US Federal Reserve kept interest rates on hold and projected a less aggressive path for interest rate hikes in coming years. However, on the domestic front there was less encouraging news as the Federation of Small Businesses said more small and medium-sized UK businesses are pessimistic about the future than positive for the first time in four years. The first survey by the FSB since the Brexit vote suggests the second largest fall in confidence in the index's history. Small business' concerns are growing that the domestic economy will weaken and it is the third quarter in a row that confidence has fallen.

Euro

European politics are expected to remain a negative for the euro but only modestly so, as long as it does not put the EU/euro project in too much doubt. The French election in April/May is probably the biggest risk as the main opposition leader Marine Le Pen, has stated she will call an EU referendum if she becomes president.

USD

The Dollar was a little soft before the FOMC meeting today, and yet again the US data was underwhelming as housing starts came in at 1.14 million which is less than last month’s 1.21 million. There is still only a 20% chance of a US rate hike this afternoon but the market certainly expects a hawkish statement afterwards and as such, the market will be pricing in a US rate hike this year. If the Fed is unable to put rates up even once this year, it will lose a lot of credibilities as it forewarned the market last December to expect four rate hikes. As we get closer to a US election, the Fed needs to be seen as a credible central bank. Otherwise, it risks having its powers diminished by the new President. The Bank of Japan changed its stimulus focus overnight and had decided to help its banks (if an economy has a strong growing banking system it is a strong sign of a strong growing economy). With the banks not being able to pass on negative interest rates in Japan they are currently losing money on deposits. To remedy this, the Bank of Japan has announced it will look to push interest rates higher for long-term lending and therefore get the banks back to profitable ways.

CAD

Interesting to note is that the USD/CAD has been closely range bound within 100 points since last Monday which leads me to believe that we are due for a drastic move. I’m assuming that this is due mostly impart to investors heavily weighting the US Fed decision to decide for themselves where to invest.  Even the Bank of Japan took a bit longer than expected to decide not to add any further stimulus. This would be a great day to speak with your traders and place a rate order on either side. 

GBP

GBPUSD fell to a five-week low, pushed by ongoing Brexit concerns over a hard Brexit and GBPEUR sales. Although there is certainly potential for a difficult departure from Europe there is also the potential for a reasonable if not good departure, (as long as it does not encourage other members of the EU to leave). Why would Europe want a weak UK? More importantly, why would Germany want a weak UK. Germany is one of the EU members that has the most to lose from the UK departure and it is the most powerful state in the EU (Merkel agreed the migrant deal with Turkey unilaterally) so although we may hear much from Jean-Claude Juncker and other unelected EU officials a decent compromise is a real possibility. It is worth noting that while the media headlines may pronounce the UK will get a hard Brexit and this will encourage sterling sales the Treasury will be quite happy to see a lower pound. We have public sector net borrowing released as well as the BoE quarterly bulletin.

Euro

The market opened up and immediately jumped higher on the back of order flow. It didn’t manage to hold its gains against the Dollar on the day but did strengthen against the pound. The Euro will be at the mercy of the Bank of Japan and the Fed. If the Bank of Japan’s efforts to stimulate its economy are ultimately seen as not enough, then EURJPY could be sold. Also, if the Fed is hawkish at their meeting this evening, then this could also weigh upon the Euro, let’s see.

USD

The market is waiting for the Fed tomorrow and as such trading was quite quiet although the Housing Market Index hit 65 in September and was its highest reading in 11 months. We have more housing data due for release today, but the market is waiting for the Fed tomorrow. The probability of a rate rise is now between 15% and 20% with some analysts still suggesting that the Fed has been very open warning the market to expect a rate hike. We refer to Brainard’s very dovish comments last week and suggest that whatever decision is made there will be much internal dissent.

CAD

Early this afternoon we have BOC Gov Poloz set to deliver a speech titled “Living with Lower for Longer”  at the Chartered Financial Analysts Society in Quebec which is clearly focused around lower interest rates globally. What is interesting to note is the main measuring tool that is used to decide whether to increase, maintain or decrease rates coming into questions as Wayne Smith quit Friday as the Canadian former chief statistician at StatsCan. Leaving with the following comment “When we publish data, people have to believe it and they won’t believe it if external forces are able to influence or prevent Statistics Canada from carrying out its mission.” Read more from the globe and mail here: http://bit.ly/2creWEL

As we in North America Sleep the Bank of Japan will release their monetary policy statement which may impact the US feds decision the following morning although doubtful.

GBP

After Friday’s UK Chancellor Hammond induced sell-off, the pound bounced during London trading hours only to fall back later in the evening. With a lack of economic data to provide direction the negative Brexit theme is weighing on the Pound although Right Move house price gauge showed that asking prices have increased by 0.7% last month after falling 0.9% after the Brexit vote. In a sign of how tricky the negotiations to leave the EU will be for the UK the European V4 countries (Poland, Hungary, Slovakia and Czech Republic) said that they would veto any agreement if its citizens working and living in Britain were not treated fairly. Quite simply, it is harder to negotiate with separate groups of countries rather than one complete group.

Euro

The Euro was range bound again despite ECB sources saying that the ECB was likely to remain on hold (for interest rates) until at least the years end. There was also negative news from the Bundesbank who said that German economic growth could slow in the third quarter, primarily due to weak manufacturing export demand. Angela Merkel the German Chancellor accepted her share of responsibility for the berlin election result and overnight was again quiet before the Fed today.

USD

For once we had US data on Friday that exceeded expectations! US CPI came in at +0.3% and better than the expected +0.2% but really US inflation is still low. The Fed’s preferred inflation gauge the personal consumption expenditure gauge is still only at 1.6% YoY against the Fed target of 2.0% YoY so the market is pricing in only a 15% probability of a rate rise this Wednesday. The weekend explosions in New York have seen some Dollar selling in the thin Asian holiday market with the major economic data point being Wednesday evenings FOMC decision. Although the market generally expects no change from the Fed there are a few Investment banks who still think the Fed will raise rates on Wednesday and if they do there could be some volatility.

GBP

With no UK data and GBPUSD being quiet overnight some traders expected a quiet day but this was not to be as GBPUSD in particular started to fall. The move accelerated after positive US data was released and was helped by UK Chancellor Hammond who said that the UK would give up access to the single market in order to control migration. By mid-afternoon the pound was testing support levels. GBPEUR was soft as well but this was primarily a Dollar move and the Euro suffered as well. Main events this week include the BoE quarterly bulletin on Wednesday and MPC member Cunliffe talking on Thursday.

Euro

The market was soft on Friday after Deutsche bank stock fell some 9% on the news that the US Dept. of Justice were looking to fine it some $14 billion for the mis selling of mortgage products. Some analysts pointed out the irony that the EU was looking to tax Amazon some Euro 13 billion but overall it was just not good news for the struggling German lender. Over the weekend Angela Merkel's CDU party registered its worst ever result in Berlin, polling just 17.6% of the vote with the Alternative for Germany (AFD) gaining 14% of the vote and allowing it entry to State Parliament. It is evident that the currency markets are entering a period where political changes and sentiment are going to have an increasing effect on prices. ECB president Draghi speaks on Thursday.

USD

The Fed keeps saying that the market should get ready for a rate hike and then the US economy keeps disappointing so that the Fed is unable to deliver. Today it was the turn of core US retail sales to come in at -0.1% and worse than the expected +0.3%. Industrial production also fell 0.4% from last month’s +0.7% so the Dollar was soft in the afternoon with the stock markets pushing higher on the back of continued easy money. We look to US CPI and University of Michigan sentiment for impetus before the weekend.

GBP

Despite falling by 0.2% from July’s+1.4% UK retail sales for August were pleasing and certainly not a reason for sterling weakness. However, this data was followed by the MPC meeting which held rates at 0.25% as expected and added that should the outlook for the economy in November remain “broadly consistent” with last month’s view (when they announced a huge stimulus package) a majority of members expect to support a further cut in the bank rate to its effective “lower boundary” later this year. This helped keep the pound under pressure despite disappointing US data. With Asian holidays looming the market was quiet overnight although GBPUSD did see buying on dips too close speculative short positions before the weekend.

Euro

As expected EU final CPI came in at 0.2% and the Euro remained range bound against its major counterparts while strengthening against the Pound. The event risk is starting for Europe now with the EU meeting in Bratislava. The EU wants 27 countries to be united in their approach to Brexit but already countries such as Hungary, Romania, and Bulgaria want to change the direction of the EU and give more power to Nation states. The single currency at the moment is ignoring the political risk; it won’t be able to do this forever.

USD
The market had started to speculate that the Bank of Japan would produce a whole new stimulus package next week but seemed to remember that on September 6th PM Abe’s adviser had suggested that the BOJ should wait until after the Fed has hiked rates before acting. In this case, the Dollar rose and then fell against the JPY. Democrat nominee Hillary Clinton returns to the campaign path today after a short break to recover from pneumonia. As is usual in elections the polls are narrowing to show a tighter race, and this may continue to make the capital markets very nervy.
 

GBP
With average earnings 3m/y coming in at 2.3% and better than the expected 2.1% but the claimant count increasing to 2.4K and worse than expected the jobs data overall was quite neutral. GBPUSD reflected this and was quite range bound, but GBPEUR was soft again as the market prepared for the BoE meeting today. We expect no change from the BoE today after last month’s huge stimulus package. We also have the release of UK retail sales today, and the market will recall last month’s positive number which was the first real economic number after the Brexit vote. It is expected to be announced that the Nuclear plant at Hinkley Point will be given the green light today. If that is the case, then it is a huge signal that the UK is open for global business and investment. In the long term, this may well stand the pound in good stead.

Euro
The biggest news in Euroland was the Bayer’s (German) purchase of Monsanto (USA) for $66 billion which has the potential to see large EURUSD selling, but this is certainly one for the future as it needs to go through the regulators first. Today we have final Euro CPI released as well as the SNB policy meeting today. No change expected for the SNB with inflation flat although having risen from -1.0% last November. It is worth noting that with the equity markets falling the Euro has gained nicely against the Commonwealth currencies.

USD

There may well be heated debate at the next FOMC meeting with opinion between Fed Governors differing widely. After the Jackson Hole meeting when the market was given the impression that September could see a rate hike we then had Fed Governor Brainard maintain her uber-dovish approach this week and even has analysis asking whether she will be in favour of raising rates at all this year. However, the main action in the capital markets at the moment is away from the FX markets with the US equity markets falling hard and losing the Brainard inspired gains. No US data today although the Dollar is gaining particularly against the JPY as the market considers that the BOJ may well ease again next week.

GBP

UK CPI was broadly in line with expectations coming in at +0.6% and the same level as July. However, a quarterly labour market survey by Manpower group, its first since June 23rd showed initial signs of decay for the labour market. Business and financial services, construction and utility sectors all showed 4 point falls in employer optimism for the third quarter and on the back of this the market sold sterling. At the close of play Sterling had lost over 1% against the Euro and Dollar. We have UK average earnings released today at 09:30 am and if the data disappoints sterling weakness could be seen again.

Euro

German ZEW was a very poor 0.5 against the expected 2.5 but as noted above had little effect on the Euro. In fact, it gained against the pound and although ECB President Draghi did talk he only spoke in broad terms about how the single market should be protected which didn’t affect the single currency. At the moment there is a correlation between the Dax and Euro which means that when the Dax falls the Euro gains and although the data from Germany was poor the Euro held its ground yesterday as the German stock exchange was weak. While many Euro traders are scratching their heads at the lack of volatility in the Euro at the moment it seems like bigger issues are looming for the EU with the Luxembourg Foreign Minister calling for Hungary to be thrown out of the EU for its immigration policies. Hungary votes on whether to accept migrants on October 2nd under mandatory EU quota regulations and will probably vote to keep migrants out. Another thorny issue for the EU to solve.

USD
USD has continued to strengthen over the weekend, breaking over 1.31 against CAD this morning. There is continued speculation we might finally see a rate hike from the Federal Reserve though given we are in the middle of election season there is a good chance it doesn’t occur until after the November vote. Today there is no data out, but a speech by FOMC member Lael Brainard is being watched by markets. Brainerd has typically been dovish, so if her speech signals a more hawkish approach it be seen as a strong sign of a rate hike.

CAD
Employment numbers came out Friday for Canada at 26.2K gained over an expected 16K, with the gains coming from full time employment. Despite this Canada didn’t outpace the numbers joining the workforce so we saw unemployment rise to 7.0% from 6.9%. Despite this CAD fell against USD and EUR with declining oil prices and a strengthening USD on increased expectations of a rate hike from the FOMC. There’s no data coming for Canada until Friday with only a speech from Bank of Canada member Wilkins on Wednesday, look for CAD to be dictated largely by oil and news from foreign markets for this week.

Euro
With the continued Euro meetings last week we got more details about the easing of the ECB’s QE program which looks to signal wider moves across Japan and the US to a more hawkish stance for markets. With little data today eyes look forward to Draghi speaking tomorrow morning as well as employment change and CPI later this week.

USD
Fed Governor Brainard was billed as possibly changing her stance from dovish to hawkish. The Equity markets had sold off in expectation of this, as had the bond market as the end of easy money was dawning. When Governor Brainard was some 5 minutes through her speech it was clear that she was still in favor of lower rates for longer and the market had to sell the dollars they had bought. The US bond market steadied and the Equity markets all bounced back. With no data due out this afternoon it could be quiet in New York trading. No Major Canadian news today

GBP
Had a quiet day yesterday as the market waited for UK CPI due out today. It is an important data point and a slightly higher inflation rate is to be expected with GBPUSD’s 10% fall since June this year, although it must be underlined that two months is really not a lot of time for inflation to feed through into the economy.

Euro
The Euro was range bound as it waited for Fed Governor Brainard to speak in the hope that she would change her stance and get some volatility into the market. When she didn’t deliver on the market expectations the market quietened down and now waits for ECB President Draghi to talk this morning and German ZEW to be released and give the market direction.
 

USD

The USD gained ground against the Pound and Euro but eased against the Yen and other G10 currencies including CAD. Yesterday the BOC decided to stay the course and leave key interest rates unchanged. This will be the 14th consecutive month that the interests rates have been unchanged as house prices continue to rise, will be keeping a close eye on tomorrow’s Canadian jobs numbers as last months -31K stud investors resulting in a fall in CAD. Overnight the Chinese trade data saw Chinese imports rise for the first time in 22 months, and this has again helped the Dollar ease against the AUD and NZD.

GBP

What goes up must come down! After a five-day rally for GBPUSD it slipped lower yesterday morning after it was announced that the UK manufacturing production dropped 0.9% in August. GBPUSD fell further in the afternoon as BoE Governor Carney testified to Parliament. Despite saying that the probability of a technical recession had fallen in recent weeks and that the latest data suggests that the economy was a “bit stronger” than BoE forecasts he finished his testimony off by commenting that the BoE still had the ability to cut interest rates if needed. This last comment pushed the pound down again, and it finished 0.75% lower on the day.

Euro

Was it the calm before the ECB storm today? Yesterday Euro trading was mainly range bound with the single currency moved primarily by other currencies and it now waits for the ECB Governor Draghi to speak today. The market has a sneaking suspicion that he could be in a dovish mood and provide weaker forecasts for the European economy as well as possibly looking to ease interest rate policy by tinkering with the ECB’s QE programme. This view gained credibility when it was announced yesterday that German industrial production fell 1.5% in August. If the German economy falters, Europe will stall more and it already has a benign inflation rate.

GBP
Quietly underpinned during London morning trading and then getting a leg up after poor US data helped GBPUSD higher. In the background there are medium term concerns over the Japanese car manufacturers in the UK moving their business to other European countries to maintain passporting access to the EU as well as Lloyds insurance voicing similar concerns about passporting into Europe from London and suggesting that they could move some of their business to Europe as well. On the economic data front we have manufacturing and industrial production for release as well as what could possibly be a bruising encounter for the BoE Governor Carney as he explains the BoE’s latest inflation report hearings to Parliament this afternoon.

Euro
German factory orders disappointed in the morning only showing a rise of +0.2% against expectations of +0.5% but this was largely ignored before US ISM non Manufacturing PMI data disappointed and helped pushed the Euro higher. Today’s early release of German industrial production saw it fall 1.5% in August with the Euro not managing so far to its gains yesterday.

USD
Had a soft tone in the morning which was exacerbated in the afternoon when the most important US economic data release for week disappointed. The ISM services data came in at 51.4 dropping sharply from 55.5 in July and dashing any market hopes of a September rate rise. This knocked the Dollar lower across the board and led to the market ignoring comments from San Francisco Fed President Williams who commented that it made sense for the Fed to raise rates sooner rather than later.

ROW
The AUD continued its push higher after the RBA kept rates unchanged and the US data disappointed. The CAD slipped a touch in advance of the BoC meeting today with no change in interest rates expected, whilst the NZD has broken through resistance levels against the US Dollar after a positive milk auction and the above mentioned poor US data.

GBP
UK Services PMI jumped an impressive 5.5 points and was the largest observed in the surveys 20 year history following on from the 4.9 point fall in July. However, the figures were somewhat expected after last week’s strong manufacturing PMI and although Sterling jumped higher it fell back later in the day after touching resistance levels. UK PM Theresa May was on the wires but didn’t add much clarity to the Brexit timetable as she stated that Brexit would not be triggered before the end of the year and she did not have a set date for when the Government would. Also not positive for Sterling was the news from Japan that Brexit may drive banks and pharma investment to the EU which encouraged Sterling sales as the day wore on.

Euro
European retail sales MoM were a pleasing rise of 1.1% but Final services PMI did fall slightly from 53.1 to 52.8 from July to August. The Euro has been trading in a broad 5 figure range against the USD since late June and shows little inclination of moving outside of this at the moment. This Thursday may well inspire some movement as we have the ECB meeting and press conference with the market expecting some kind of extension for the ECB’s QE policy.

USD
US Labor Day holiday was enjoyed by all except president Obama who was at the G20 summit in China. The market will look to ISM Non Manufacturing PMI for direction this afternoon.

ROW
The main mover yesterday was the Loonie which followed the oil price higher on the back of a lot of jawboning by Russia although the actual announcement by the Russian energy minister included a comment that low oil prices are not good for production or consumers(?). Making more sense he continued by suggesting that oil producing countries need to choose a month which will be a benchmark for a production freeze. Saudi Arabia did advise that it had signed a deal to seek cooperation in oil markets with Russia and this has kept the oil price and CAD firm.

Overnight the RBA didn’t change rates as was expected whilst mentioning that a rising AUD could still complicate the rebalancing of the economy. The AUD has firmed after the RBA statement.

USD

The US Dollar Index is marginally stronger this morning as the currency markets get set for the release of the US Employment Report for August. We are expecting 180K new jobs to have been created last month which will be in line with what we have seen over the year so far, we are also looking for a small dip in the unemployment rate. We should see a great deal of volatility around this release, if the number exceeds expectation that we will see the Greenback take a big jump as the likelihood of a US interest rate hike in September increases, if the number comes in around expectation that I think we see a small jump in the US Dollar and a disappointing number will drive the Dollar a lot lower.

CAD

USD.CAD is unchanged for the most part and in addition to the US number we also get the Canadian Employment report for August today. I misspoke early in the week; I thought our Canadian jobs report was due out today but it in fact is next Friday which means that all USD.CAD trading today will depend on what the US number is. A strong US report and USD.CAD could easily hit 1.3200, if it comes in as expected we will move ahead about 50 points and a poor number will push USD.CAD back below 1.3000 quickly.

Remember that we are closed on Monday but the currency markets will still be trading (volume and volatility should remain low) make sure you get your orders in early today in case something stupid should happen.

USD

The US Dollar index is still on the rise as it continues to gain momentum from Yellen’s comments last week hinting of a possible interest rate hike before the end of the year. The Dollar has gained the most against the Japanese Yen as it is up over 3% in a week, that should make the Japanese government happy as they favour a weak currency. Currently, markets are pricing in a 25% chance of a rate hike in November and a 55% chance in December. The Dollar also got a bit of a boost yesterday as the Consumer Confidence report came in at an 11-month high, something the US needed after a few weeks of poorer than expected data.
 

CAD
USD.CAD moved a little higher last night as the Loonie continues to feel the pressure from the stronger Greenback, a trend that I feel will continue over the next few weeks. If we continue to see strong data out of the US, there is no reason not to expect USD.CAD to move towards 1.3300. The Loonie continues to hold its ground against the Euro but is losing ground to the Pound as the post Brexit resurgence of Sterling continues.

To end the month of August we get some secondary US data including the ADP private payroll report but USD.CAD trading will be closely watching the Canadian GDP report for the 2nd quarter this morning. We are expecting the annualized growth rate to have dropped by 1.5% in the quarter primarily due to the wildfires in Alberta. This number will put us on a yearly growth target of 1.0% which should improve in the 2nd quarter.

It some good news for Canada, the Chinese government has agreed to withdraw it Canola import ban on Canadian Canola pending further discussion between the two countries, this would have been a devastating development for Canadian Canola farmers had it come to pass and would have been a hit to the Canadian GDP.
 

USD

The US Dollar index is stronger this morning as sentiment has changed due to the US Federal Reserve indicating that the conditions for increasing US interest rates has improved. In her Jackson Hole speech on Friday Yellen stated that the labour market and the overall US economy has improved giving her the comfort level to move higher on interest rates, her statement was followed up later in the day by Fed member Fischer who said Yellen’s speech was consistent with an interest rate hike this year. The market is now pricing in a 30% chance of an interest rate hike this September (up from 18%) and if we get a strong US Employment report this week, then we could see that percentage even go higher.

CAD

USD.CAD had a wild day on Friday, it initially went higher as you would expect but then quickly came right back down to the pre-speech levels. It was not until Fischer opened his mouth that USD.CAD really took off and now looks set to test higher levels, the Loonie has been quite resilient over the past few weeks so I don’t think we will see a quick jump higher but if the economic data out of the US continues to improve then the case for interest rate hikes is strengthened and we will see USD.CAD start to move higher.

The Economic calendar is quite full this week as we move into the month of September, today we get some US secondary data and the month comes to a close on Wednesday with the Canadian GDP report. The week comes to a close on Friday with both US and Canadian Employment reports coming due, with the added emphasis on the US Employment report we will have a very busy start to the month

USD

The US Dollar index is marginally lower this morning as the market gets ready for this year most important speech from Janet Yellen, with the window narrowing for a possible interest rate hike this year the market will be looking for any indication on which way the Fed will go, either way, I think we could see some enhanced volatility surrounding the speech.
 

CAD
The Canadian Dollar had a good night recovering from its lowest point yesterday picking up some 45 points overnight, and it looks set to continue to move higher at the moment. It also had a good night against the Pound and the Euro, picking up 60 points against the Sterling and 100 points against the Euro. The Loonie looks strong heading into the Yellen speech.

As mentioned today’s trading and in fact trading over the next few sessions will be affected by what Yellen says today but in addition to her speech we also get the US 2nd quarter GDP report where we are expecting a slight decline in the growth rate to 1.1% down from 1.2%. We certainly could see lots of volatility in the market today so make sure you get your orders in early.
 

GBP
Sterling was briefly higher this morning as Consumer Confidence in the UK showed it was recovering from the post-Brexit vote, GBP.USD jumped to trade at 1.3230 before falling back a bit this morning. Perhaps all the fear created surrounding the Brexit vote is not founded, after all, it would be most unlike financial markets to start a wave of panic for no reason, would it? {insert sarcasm here}.
 

USD

The US Dollar index is marginally lower this morning as currency traders await Yellen’s speech tomorrow. EURO.USD recovered yesterday’s losses as the Euro rose 50 pips overnight in spite of a very poor business survey that showed German business was losing confidence in the economy. This survey was taken shortly after the Brexit vote so that may have played a factor in the results, the next survey may have a different outcome.

CAD

USD.CAD trading was again confined to a narrow range overnight, I don’t think the currency pair will move all that much ahead of tomorrow’s speech by Yellen. The Loonie is pretty much flat against the Euro but did pick up a little strength against the Pound overnight, but it is still above the 1.7000 level at the moment.

With only US Durable Goods on the calendar for today, I would not expect much to happen, the market will set up for the US GDP report tomorrow and then await the Yellen speech hoping for some tidbit on her plans for US Interest rates.

USD
Purchases of new U.S. homes unexpectedly jumped in July to the highest level in almost nine years, led by soaring demand in the nation’s south and adding to signs of persistent housing-market strength. Sales increased 12.4 percent, the fastest since October 2007, Commerce Department data showed Tuesday in Washington. Employment gains and historically low borrowing costs are providing firm support for housing demand, helping reduce inventory, which will probably keep new construction elevated. The report showed an increase in the share of homes sold for less than $300,000, indicating builders are turning their sights to entry-level buyers. With the market still focused on Jackson Hole on Friday the Dollar was sold yesterday on speculation that Janet Yellen will be noncommittal in her speech, according to FX traders in Asia.
 

Euro

August’s slight rise in the euro-zone composite PMI from 53.2 to 53.3 suggests that, while the region has so far weathered the UK’s Brexit vote, economic conditions remain fairly subdued. The limited country data showed a convergence between the PMIs for Germany and France. The German composite PMI fell back from 55.3 to 54.4 in August while the French PMI recorded a surprisingly sharp rise from 50.1 to 51.6. Overall, growth remains too sluggish to push core inflation back to the ECB’s target. As such, it is likely that the ECB will increase monetary support at its meeting in September. August’s fall in the index of euro-zone consumer confidence, from -7.9 to -8.5, disappointed consensus expectations of a rise to -7.7 and leaves the index well below its Q2 average of -7.8. The declines in confidence in July and August point to a weak household consumption growth in Q3.

GBP
The relatively upbeat tone of August’s CBI Industrial Trends Survey gave us another reason to be tentatively optimistic about the extent to which the economy has taken a hit from the referendum outcome. Admittedly, the headline total orders balance dipped from -4 in July to -5 in August. But this was still above the consensus expectation of a further plunge to -10, and above its long-run average of -20. What’s more, the forward-looking output expectations balance rose from +6 to +11, and on the basis of past form points to positive, albeit weak quarterly growth in manufacturing output. In part, the weaker pound seems to be already starting to help cushion the blow for manufacturers. Indeed, the export orders balance rose sharply from -22 in July to -6 in August, its highest since August 2014. That said, firms also expect the weaker pound to have an impact on prices, with the price expectations balance rising from +5 to +8, its highest since February 2015. All in all, then, while it is still early days, the latest survey is another reason to think that the economy should avoid a deep recession.

USD

The US Dollar is marginally weaker this morning as investors start to take profit on the recent strength in the Greenback. The “will they or will they not” game of increasing interest rates in the US takes another turn as on Friday Federal Reserve Chairperson Janet Yellen takes center stage in her address to the Jackson Hole gathering of the world’s central bankers. Up until now, there has been no clear consensus for an interest rate hike in the US, and I will stick with my view that they will not raise in September but will raise interest rates in December when the election is over.
 

CAD
USD.CAD recovered a bit of its losses from yesterday, but overnight activity remained very quiet. The Loonie is off of its worst levels against the Euro but is still relatively weak against Sterling and GBP.CAD remains at its most recent highs.

The only economic event of note today is the business activity report from the Richmond Federal Reserve, again secondary data that should not have a dramatic effect on the currency markets but if it disappoints then we could see some added volatility today.

USD

The US Dollar index is marginally stronger to start the new trading week in a quiet overnight trading session. The Greenback continues to be picking up some steam from Federal Reserve committee members publically talking about an interest rate hike this year; the overall US Dollar index is at its highest level in the last ten days as sentiment for a weaker US Dollar seems to have reversed.
 

CAD
USD.CAD has moved higher in overnight trading as it gives back some strength due to the strengthening Greenback. The oil price seems to be back in the limelight, after a good solid week when the price rose considerably. The price of a barrel of oil dropped over $1.50 last night as US Investment Bank Morgan Stanley published a report saying they do not see any consensus by the OPEC nations to put a freeze on production at the next OPEC meeting. Keep an eye on the oil price today as a further drop could push USD.CAD back towards 1.3000.
 

Euro
Both EURO.CAD and GBP.CAD have moved higher as a result of the weakening Loonie and look set at the moment to both moves higher yet.

Trading this week will be dominated by the US GDP report for the 2nd Quarter on Friday, a strong number may bring a September interest rate hike back in focus but for now, I will stick with my view that we will not see any rate hikes in the US until after the Election in November. Up today we get the Canadian Wholesale Trade report for June, a disappointing report may put some more pressure on the Loonie and drive USD.CAD higher.

USD

The US Dollar is marginally stronger this morning as it stalls its recent bout of weakness, recent calls from Fed officials about a possible rate hike have stalled the drop even in the face of a mixed Federal Reserve panel.

In yesterday’s US data the Philadelphia Federal Reserve reported that manufacturing in the region picked up by 2.0% which was a positive sign if the US economic data can get on a bit of a run we should see the US Dollar pull back more of its losses in the coming days.
 

CAD
USD.CAD looks set to move higher at the moment; it is off the recent lows and with the Greenback showing signs of life we could see the Loonie start to give back strength, keep an eye on the US data for direction. The Loonie has stabilized its losses against the Euro and Sterling for the moment.

Up today we get the release of the Canadian Retail Sales Report for June and the Inflation report for July. For the Sales report, we are expecting 0.5% increase, for inflation, we are looking for an annualized rate of inflation of 1.4% down from 1.5%. The Bank of Canada target for inflation remains at 2.0% so a declining number may want to push them closer to an interest rate cut in the future. Either way, we could see some volatility heading into the numbers so make sure you are ready.

USD
The US Dollar index is marginally lower this morning dropping to new two-month lows against the major currencies. The minutes of the last Federal Reserve meeting showed there is no clear consensus among committee members as to the timing of the next interest rate decision leading to a jump in equity markets and a drop in the Greenback.

CAD
The Canadian Dollar continues to do well against the weakened Greenback holding onto recent gains, but the Loonie is being outperformed by both the Euro and Sterling at the moment so EURO.CAD and GBP.CAD continue to push a little higher. Look for this scenario to continue through the end of the month.

Up today we get secondary data out of the US including the Philadelphia Federal Reserve Business survey for August and also the Leading Indicators report for July, once again disappointing numbers even in secondary data could be enough to push the US Dollar lower.

Euro
EURO.USD has increased to an overnight high of 1.1330 but the big mover was Sterling as it jumped to trade at 1.3160 against the US Dollar. The UK Office for National Statistics reported that Retail Sales for June came in much better than expected, a positive sign for a troubled UK economy.

USD
The US Dollar index is marginally higher this morning as calls yesterday afternoon from FED Committee members Dudley and Lockhart for an interest rate hike in September gave the Greenback a lift and pushed the US Dollar off of its lows from yesterday. Up today we get the Federal Reserve minutes from their last meeting so the market will be looking to see if there is a growing consensus for a rate hike in September, I think they will now wait until December when the US election is over.

CAD
USD.CAD had a quiet night but with the strengthening US dollar it gave back some of the gains it made yesterday but at the moment the momentum remains with the Loonie against the US Dollar. Remain cautious as any hint of an interest rate hike in September will give the US Dollar a lot of strength and the exchange rate will move back higher. The Loonie is also holding its ground against the EURO and Sterling but is at its lowest levels of the week.

With only the FOMC minutes release on the calendar for today, we should see quiet trading conditions ahead of that release this afternoon as I mentioned if there is a growing consensus for a rate hike in September then look out USD.CAD will jump much higher.

USD
The US Dollar index is much weaker this morning as the weak economic data that we have seen out of the US continues to weigh on the Greenback, the more poor data we get, the less the likelihood of a US interest rate hike and more pressure will build on the US Dollar. Both the Euro and Pound were over 100 points higher against the Greenback overnight with Euro being led by a better than expected economic sentiment report and Sterling being led by an inflation report that came in higher than anticipated.

CAD
The Canadian Dollar was a big winner against the US Dollar as USD.CAD has dropped to levels last seen in May, once again this has nothing to do with the Loonie and is more a reactionary move due to the weak Greenback. This point was brought home as with the overnight strength in the Euro and Pound the Loonie lost ground to both of these currencies as they strengthened more against the US Dollar than the CAD did. For US Dollar buyers it certainly looks like an excellent opportunity to pick up some gains, there is always the possibility that some positive economic news (Friday’s US GDP as an example) could quickly reserve this trend. iIt is always a good move to take a little money off the table when you have a win. US Dollar sellers now need to be concerned that this could be a bigger reversal than previously thought, look to sell some USD close to the market if you are at all worried about a more significant move. I would expect to see a bit of a pullback in the coming days but orders left near the current level may be a good strategy.

Only Secondary US Data due out today but as we have seen recently even weak secondary data is having an adverse effect on the US Dollar. If the US Richmond Federal Reserve business survey disappoints the market look for the US Dollar to take another hit, if it is stronger than expected look for the Greenback to jump a bit.

USD
The US Dollar remains under pressure this morning as the Greenback continues to get hit as a result of Friday’s weak economic data out of the US. The US Retail Sales report showed Retail Sales in July were flat (expected 0.4% rise), and the Producer Price Index showed a decline of 0.4% way off the intended increase in prices of 0.1%. Again we see negative data coming out of the US and putting doubt in investor confidence that the US Federal Reserve will be able to increase interest rates this year.

CAD
The Canadian Dollar continues to benefit from this weak US Dollar sentiment with USD.CAD approaching one-month lows below 1.3000, The Loonie continues to tread water against the Euro but with the overall weakness in Sterling the Loonie continues to pick up strength against the Pound and looks set to continue that trend over the medium-term.

A relatively light week on the economic calendar this week as the highlight will be the US GDP report for the 2nd quarter on Friday, the rest of the week is quiet with the lone exception being today where we get Canadian Wholesale Trade for June. In looking ahead for the week the US Dollar should trade with a weak bias, but once again the US Dollar buyers should not wait for the big drop, every time recently that the US Dollar shows signs of strength it quickly snaps back. For US Dollar sellers this week we could see slightly higher rates, but I would not expect a big jump in USD.CAD, take advantage of any small moves higher.

USD
The US Dollar is unchanged this morning as it spent yesterday afternoon getting stronger against most currency pairs. In Europe, the EU reported that Gross Domestic Product rose 0.3%which was the same as last quarter and in line with the market expectation, EURO.USD was able to pull back a bit higher but in reality that is still a very poor growth rate and not likely to bring any sustained strength to the Euro.

CAD
USD.CAD bucked the overnight trend and the Loonie was able to hold onto its gains that it made yesterday afternoon, USD.CAD has now recovered all of it losses from last Friday and is showing signs of being quite resilient. With the strength in the Loonie yesterday EURO.CAD finally fell a little, after looking at one point like it wanted to test 1.4900 EURO.CAD is back lower in very familiar ranges, GBP.CAD has settled in around the 1.6900 range for the moment so the sun keeps shining on our Loonie.

Up today trading will be highlighted by the US Retail Sales report where we are looking for a monthly increase of 0.4%, as I mention yesterday in these thin summer trading markets even secondary US data seems to have an effect on the market so if this number disappoints then look for USD.CAD to drop towards 1,2950. A strong number should push I the exchange rate back higher.

USD
The US Dollar index is marginally stronger this morning in quiet overnight trading conditions, markets are getting ready for today’s non-farm payroll report (amount of new applications for employment insurance) and tomorrow’s US Retail Sales report. They are looking to see if the Retail Sales report follows on the same trend as the poor Productivity report from earlier in the week which if it does will hit the US Dollar.

CAD
Nothing much to report for USD.CAD, so far the Loonie has held onto its gains that it recorded earlier in the week, and again it looks to continue to range trade in a relatively narrow band for the time being. With the overnight weakness in Sterling the Loonie did pick up some strength against the Pound and the inter-bank rate has dropped below the 1.7000 level.

GBP
Sterling was again the big mover last night as at one point the exchange rate against the US Dollar fell below 1.2950. It was reported that the Bank of England could not find enough sellers of UK debt to meet its monthly stimulus target of 1.17 Billion Pounds. In other overnight news the Reserve Bank of New Zealand lowered their main interest rate from 2.25% to 2.0%, the Central Bank cited the high value of the New Zealand dollar has hurt the country’s export market (could the Bank of Canada be far behind with a rate cut of its own?). Funny enough the Kiwi jumped higher on the announcement where typically an interest rate cut will devalue a countries currency.

USD
The US Dollar index is weaker this morning as yesterday’s weak US productivity data but a damper on investor expectations of a US interests rate hikes this year. The release was the third consecutive quarter where productivity in the US declined, we had not seen numbers like that since 1980 when the US had a significant recession. It certainly is starting to look like even secondary US data is now playing havoc with the currency market, investors are clearly nervous about what the Fed will do next and when markets get nervous then you get added volatility.

CAD
One of the biggest benefactors of the weak US Dollar has been the Canadian Dollar USD.CAD dropped overnight by over 0.5%; we are almost back right where we were when the weak Jobs report came in; this is a great win for US Dollar buyers. The Loonie has not been able to extend any real gains against the Euro as EURO.USD moved higher as well, the Loonie did pick up against Sterling as the Pound is weaker against the US Dollar on comments from a BOE official that more stimulus will be needed to offset the coming economic downturn in the UK, it looks like GBP.CAD will break below 1.7000 soon. If you have been dreaming about a holiday in the UK now is the time, late last year you would have been paying close 2.1000 for your Pounds.

Nothing of note on the economic calendar today so I look for USD.CAD to stop its run lower and rebound a bit higher all the while staying within recent ranges. US Dollar buyers should take advantage of this pullback and get some USD on board; we have seen over the last few months that Canadian Dollar rallies can be cut short very quickly.

USD
The US Dollar index is marginally stronger in quiet overnight trading conditions since the US jobs report on Friday the FX markets have been very subdued with little movement. GBP.USD was a little lower overnight as manufacturing data out of the UK showed a slight decline which was worse than the expected level, Sterling will remain with a weakening bias for some time to come.

CAD
USD.CAD had another quiet session and had not moved since Friday’s debacle; the Loonie did pick up some strength against Sterling as GBP.CAD dropped almost 100 points on the weaker Pound. I am quite surprised that USD.CAD did not move higher, the longer the rate can hang in below 1.3200 the more of a chance the Loonie has to get a little stronger, everything considered our currency is doing quite well at the moment.

We have some secondary data out of the US today which includes Wholesale Trade. US Dollar buyers should be ready with their orders below 1.3150 and US Dollars should be looking to take advantage of current rates in case the Loonie does go into recovery mode.

USD
The US Dollar index starts the new week unchanged from the North American close on Friday; financial markets are digesting the great Employment report from Friday and what it means for a possible interest rate hike next month. The US economy was expected to add 180K new jobs last month, but it created 255K new jobs which blew away the market expectation. As a result of this, the US Dollar surged on Friday, and it was able to hold onto its strength over the weekend.

CAD
USD.CAD also had a quiet start to the week but for the Loonie the damage was done on Friday as USD.CAD jumped almost 150 points as the strong US Employment report, and the weak Canadian Jobs report pushed the Loonie lower against everything. That being said we are still in the same trading range that we have been for a while now so unless we get a big break above the 1.3300 level at some point this week USD.CAD could just as easily move back towards 1.3000 as it could go higher to 1.3500, we will see what develops.

The economic calendar is relatively light this week with the only data of real importance being the US Retail Sales report on Friday, look for USD.CAD to settle down a bit and range trade over the next few days, I favor a bit of an initial pullback for USD.CAD as Friday’s move was a bit extreme. Overall there is still room to go higher, but that may be a way off yet.

USD
The US Dollar is unchanged this morning as the market gets set for the latest Department of Labor employment report. Yesterday saw the US Factory Order report come in below expectation, and the Initial jobless claims report (new applicants for Employment Insurance) grew by 3,000 which are both worrying trends for the Employment report today. We are expecting another 150k to 180k new jobs to have been created south of the border, so if this number comes in below expectation, then we will see the US Dollar get hit hard.

CAD
The Canadian Dollar is also unchanged against everything this morning as USD.CAD traded in a narrow range overnight. Up today we also get the Canadian Employment report for July, and we are expecting between 5k and 10K new jobs to have been created after we had a down month in June. For the most part USD.CAD trading will focus on the US report, but if we do get another crazy number then the Loonie will be affected, either way, we will see enhanced volatility for a while this morning, get your orders in early.

USD
The US Dollar is stronger this morning as the Bank of England has announced a massive new program to combat the adverse effects on the UK economy as a result of the Brexit vote. They have cut their interest rate for the first time since 2009 from 0.5% to 0.25% and have increased their plan to buy back government debt by 600 billion pounds thus flooding the economy with cheap cash. In addition for the first time they have announced that they are buying corporate bonds and have put in place a “Term Funding Scheme” (about 100 Billion Pounds) to ensure that banks keep lending to corporations and the public. I am not quite sure how that will work, but we will find out more over the coming weeks. The BOE stated that the UK economy will stagnate this year and have no growth next year, so another interest rate cut to 0% is most likely in the next few months.

GBP
As you would expect Sterling has been hit hard with GBP/USD down about 200 points and GBP.CAD down about the same. I think there will be room for the Pound to drop further but it may pause for a while now that the BOE has announced their policy. The Euro is losing a bit of ground against the US Dollar, but it has picked up some strength against the Pound, so all in all the Euro is hanging in there at the moment.

CAD
Other than picking up some strength against the Pound the Loonie had a quiet night as it is unchanged against the Greenback, it is picking up a little strength against the Euro so all things being considered the Canadian Dollar had a good night.

With only US Factory orders out today, we should have a relatively stable day as we get set up for the release of the employment reports tomorrow morning. US private payroll report yesterday showing 176K jobs being created in June the Department of Labour report will be expected to produce similar results or the markets will punish the US Dollar, it will be a closely watched report

USD
The US Dollar index is marginally stronger this morning but still within recent levels of most currency pairs. Yesterday one of the Federal Reserve regional heads stated that the Fed should take a cautious approach to increasing interest rates so that put a damper on any significant US strength. Both the Euro and Sterling were marginally weaker overnight as the markets get ready for tomorrow’s Super Thursday data from the Bank of England, we could see further consolidation during North American trading as currency traders square up their positions ahead of those announcements.

CAD
Light day today on the economic calendar so look for USD.CAD to have muted ranges and start to get set up for Friday’s Canadian and US employment data. Those numbers can produce extreme volatility so make sure you have your orders in early.

Euro
USD.CAD was marginally higher overnight as the price of oil dipped to $39.60 during Asian trading hours, the oil price did pull back to $40 at one point, and the Loonie recovered some of those losses, this is the lowest oil price we have seen since last April. The Loonie continues to lose ground to the Euro but as I write EURO.CAD is off it highest levels of the overnight session and looks set to improve a bit, and everything will depend on how the Loonie does against the US Dollar over the next couple of days.

USD
The US Dollar is weaker this morning as it still reels from the effects of the very poor GDP report on Friday. The US Economy grew at a 1.2% annualized pace in the 2nd quarter; the expectation was for a growth rate of 2.6%, so the US economy is not growing nearly as fast as was anticipated, this may slow down the pace of interest rate hikes in the US. EURO.USD is up at 1.120 levels last seen at the end of June, GBP.USD is also at one-month highs but remains vulnerable as the Bank of England is expected to announce a broad range of stimulus programs, and an interest rate cut to stimulate the UK economy post-Brexit.

CAD
The Canadian Dollar had a great afternoon on Friday as USD.CAD dropped on the weak US data but since then the Loonie has once again started to retreat as the price of oil dipped below the $40 a barrel for the first time in months. The Loonie did pull back some of yesterday’s losses early this morning as the oil price rebounded a bit but USD.CAD still has a way to go if to hit it lows from Friday. EURO.CAD also traded lower yesterday but remains in recent ranges; it will take a big push to get EURO.CAD to new levels.

The Economic calendar this week is a busy one to start the new month, it will be highlighted by the Bank of England interest rate announcement on Thursday. This particular announcement is referred to as Super Thursday as the BOE will release the Inflation Report, they will vote on interest rates and publicize both the Monetary Policy Report and the new stimulus program, Sterling should have a very busy week. On Friday we get the US and Canadian Employment reports so volatility should remain high as we start August

USD
The US Dollar index is marginally lower this morning in a lackluster overnight trading session. The big mover overnight was USD/JPY that fell 1.6% as the Bank of Japan did not lower interest rates as expected and only increased their stimulus program by a modest amount,. The Japanese Yen which had rallied in the past few session on the expectation of further Central Bank action fell back which will be at odds with the government wanting a weaker Yen to improve exports.

CAD
The Canadian Dollar is unchanged against the Greenback this morning and slightly weaker against the Euro and Sterling. Against the Euro, the Loonie is starting to push up to recent highs for EURO.CAD so it will be interesting to see if it can continue that trend or pullback as it has done over many times in the past few months.

Trading today will be dominated by the US and Canadian GDP reports, in the US we are expecting an annualized growth rate of 2.5% (up from 1.1%), this number will be closely watched as a strong number should give ample evidence to the Fed that an interest rate hike will not hurt growth. In Canada we are expecting a drop in the growth rate of 0.3% (to 1.2% on an annualized level) as the Fort McMurray fire works its way through the economy, future projections should be back in line for minimal growth once all of the oil projects are back on-line. Either way, we should see some added volatility around these releases.

Just a reminder that our Canadian offices are closed on Monday so make sure you get your orders in early today so we can process your payments.

USD
The US Dollar index is marginally lower as the currency markets reacted to the Federal Reserve decision to leave interest rates at current levels by pushing the Greenback lower. The statement was fairly ambivalent and did not provide any new insight; they did say that “near-term risks to the economy have diminished” and the labor market has grown stronger which indicated to me that they are still planning to increase interest rates later this year.

CAD
The Canadian Dollar traded strong throughout the night but has since lost ground in the London session to the US Dollar, USD.CAD after a 70 point gain at one point is now right back where we closed it last night. The price of oil which is down for the 6th straight day is most likely weighing on the Loonie and preventing it from picking up any sustained gains against the US dollar that traded weaker last night. Suncor produced it latest results and it reported a $700 million loss in the latest quarter brought on by the Fort McMurray fires, this too could be weighing a little bit on the Loonie.

Nothing of note on the North American economic calendar today, the markets will start to setup for the US and Canadian GDP reports which will come out tomorrow, we should see USD.CAD trade in native ranges with a breakout on either side is unlikely.

Euro
The Euro was able to reach a two-week high against the US Dollar as better than expected employment data in Spain and Germany helped to boost the common currency, the Pound on the other hand traded lower as GBP.USD was down about 100 points underlining the negative sentiment surrounding Sterling at the moment.

USD
The US Dollar index is unchanged ahead of the Federal Reserve meeting on interest rates later today. In addition to the Federal Reserve meeting announcement which will dominate the currency markets we do get the US Durable Goods report for June, Unless the DG report surprises, I think the markets and USD will pretty much ignore this.CAD will range trade ahead of the Fed announcement.

CAD
The Canadian Dollar recovered a little bit yesterday which is not a big surprise as USD.CAD had come a long way in the last couple of days, as I said yesterday we are most likely going to range trade between 1.3000 and 1.33000 now for a few days until we get the next bit of news which may come today from the Fed. The Loonie lost a little ground to the Euro but did pick up some gains on the Pound as weakness in Sterling pushed GBP.CAD lower.

Euro
In overnight news, the final measure of the UK economy before the Brexit vote came in and showed a 0.6% rise in GDP for the 2nd quarter which came in slightly better than expected. That being said the expectation is now for the UK GDP to start declining, so Sterling still traded lower on this positive number.

JPY
In Japan, Prime Minister Abe announced a new stimulus package of $265.3 Billion USD to prop up Japan’s slowing economy; also, it is expected that the Bank of Japan will further cut interest rates when they next meet in an attempt to weaken the Yen and boost the Japanese export market. Overnight the news was received as positive as the Nikkei market jumped and the Yen weakened as USD.JPY rose to trade at 106.50, but long-term effects are not as certain.

USD
The US Dollar is marginally weaker to start the North American morning; The Currency markets are waiting to hear what the US Federal Reserve is planning on interest rates this afternoon before making any intra-day moves. In the only overnight news the Japanese Yen was boosted by reports the Japanese Government was planning a direct investment of around $56 Billion USD (6 trillion Yen) over the next few years. There was no official comment from the government, but this amount seemed to disappoint the markets which were looking for a larger amount.

CAD
The Canadian Dollar is marginally weaker against the US Dollar this morning; it did post some gains early in the overnight session but quickly gave those back and USD.CAD trades a bit higher this morning. The Currency pair pretty much unfolded as I thought it would before I went away for the weekend with USD.CAD moving beyond the 1.3100 level on a good strong break, the Loonie has also lost ground to both the Euro and Sterling, so it is showing weakness across the board. I would expect for the very short-term that USD.CAD would now range trade between 1.300 and 1.3300, but I still favor a move higher over the coming weeks, perhaps settling in around the 1.3500 level down the road.

Up today we do get some secondary US data followed by the all-important US Interest rate announcement from the Federal Reserve open market committee. While we are not expecting any changes to the interest rate the market will be looking for any timing hints on the next US Interest rate hike, the Brexit fears seemed to have calmed for the moment so they may hint at doing another interest rate hike before the end of the year.

USD
The US is up due in part to when the other developed market currencies are under pressure; the USD is bound to benefit and last week it gained nicely against developed markets and the Commonwealth currencies as well. G20 over the weekend voiced concerns over globalization slowing down and indeed it seems like populations around the world want to travel on a different path than is currently trading. Wednesday is the big day for the US this week with the FOMC meeting and interest rate announcement although we expect no change here. This is followed by the BOJ meeting on Friday with the market expecting stimulus varying from Yen 10 Trillion to Yen 30 Trillion.

GBP
Overall the market is waiting for data providing updates on the UK economy after June 24th and Friday saw the first PMI data since the Brexit vote. The PMI Services reading came in at 47.4 and was the biggest drop on record with the composite reading of services, manufacturing, and construction being 47.7 showing a sharp contraction in the UK economy and being the lowest level since April 2009. For this week we have the release of CBI industrial order expectations on Monday morning and we then move on to UK mortgage approvals on Tuesday. Preliminary GDP is released on Wednesday and is followed by the BoE releasing its mortgage approval data for June on Friday. All of these releases will be used to gauge to see if the Pound should continue its fall across the board.

Euro
The EUR managed to gain ground against the Pound on the back of Sterling weakness, but overall trading has been limited and quiet recently. The only noteworthy news on Friday was that the Head of the IMF Christine Lagarde is to be tried for negligence over a payout to French multimillionaire Bernard Tapie for Euro 404 million in 2008 when she was France’s economy minister. At the G20 meeting in China over the weekend the acting Spanish economy minister said that Spain’s economy could grow 2.9% this year and better than the 2.7% target, this is despite Spain not having a Govt. and if they can get one soon, things could be even better. Unfortunately, there have been at least two far-reaching incidents/attacks in Germany over the weekend which doesn’t bode well for EU stability.

USD
The main focus was a repeat of an interview with BOJ Governor Kuroda given in mid-June when he dismissed the idea of “helicopter money”. It was re-run yesterday and the USD was sold off against the Yen quickly. We have the BOJ meeting next week which will be important as the market expects another stimulus package. When the BOJ took interest rates negative in January the Yen made huge counter intuitive gains so it is possible for large moves in USDYEN, GBPYEN and AUDYEN next week. As for US economic data the Philly Fed Manufacturing Index came in below expectations but existing home sales and US leading indicators were better than expected so with the ECB standing pat the USD was firm away from the Yen.

CAD
Canada finally gets some news out for itself with both CPI and Retail Sales. CPI is expected to be largely flat, so any growth there could see a reversal of recent loses. We’re still largely range bound.

GBP
Analysts were expecting a small dip in June retail sales as the months of April and May were pretty solid. Unfortunately, we saw a fall of -0.9% which was more than the expected dip of -0.6%. The Pound was duly sold but was quickly bought back after Public sector borrowing data showed the Govt. had not borrowed as much as expected. It seems as if we are entering the holiday period for the markets which is characterised by volatile and thin trading conditions. The market is wary of pushing Sterling too far at the moment as it waits for data. First reading Purchasing Managers Index released today will give us a clue on that front.

Euro
We waited all week for the ECB to do precisely nothing (which we did expect) and were ultimately disappointed by ECB President Draghi’s press conference as well which in football terms would be deemed to be “a very safe pair of hands”. Draghi did mention that Brexit was “a headwind to recovery” and that he saw “no Brexit induced disruption apparent in the banking sector” but it does seem like the holidays are starting. After the first 6 months of this year the markets need a break!

 

USD
The US Dollar Index is marginally weaker this morning as markets await the ECB policy announcement on interest rates and will look at Governor Draghi’s comments to see if further stimulus will be needed to prop up the EU economy after the uncertainty created by the Brexit vote.

CAD
USD.CAD moved a bit lower from yesterday’s highs, still no sign of a breakout in either direction but I still favor a breakout at some point above the 1.3100 level. EURO.CAD continues to trade in a tight range, and it is only GBP.CAD that seems to be moving around, GBP.CAD opens the day down about 100 pips from its highest levels of yesterday.

EUR
Once we get the ECB announcement out of the way this morning we get a slew of US secondary data out followed by Canadian Wholesale trade data, with all the economic activity we could be in for a very busy morning.

GBP/JPY
No big movers overnight, Sterling was little changed despite a slightly poorer than expected Retail Sales report, in Japan USD.JPY remains near short-term highs as that country’s central bank is projected to announce further stimulus measures in the coming weeks, overall a very quiet evening.

USD
The US Dollar index is marginally weaker with Sterling once again leading the Greenback lower. In the UK the Bank of England said there was no evidence so far of a post-Brexit slowdown in the economy, in fact, the UK unemployment rate fell to 4.9% the lowest level since 2005. GBP.USD was able to rise up towards 1.3180 after opening the morning at 1.3060, the Euro traded down to its lowest levels against the Greenback since late June (1.0980) but did recover a bit early this morning. The European market will now focus on the ECB announcement tomorrow morning for its direction.

CAD
The USD.CAD exchange rate continues its climb towards the top end of recent ranges; I still favor a break higher for the exchange rate but if this is the time it moves is anybody’s guess. EURO.CAD continues to tread water at the moment and with the strength in the Pound GBP.CAD continues to move higher, all pretty much the same pattern of the past few weeks. The market has calmed down post-Brexit and is waiting for the next big piece of news.

Nothing of note on the economic calendar today as mentioned the market would get set for the ECB announcement tomorrow. Ahead of that announcement I look for USD.CAD to continue to test a little higher at some point and see if it wants to break out of this recent range.

USD
The US Dollar index is marginally stronger this morning in quiet overnight trading. In the UK the Pound has given back some strength despite a rise in inflation which would have normally been positive for the Pound, markets are now waiting on the International Monetary Fund to downgrade growth in the UK following the Brexit vote. In other overnight news both the New Zealand and Australian Dollars are lower as the likelihood of interest rate cuts are in the offing, each country is battling a hot housing market and are introducing new restrictions to combat that problem; that has a very familiar ring to it.

CAD
The Canadian Dollar has given back some of its recent strength as USD.CAD once again moves back towards the higher end of recent ranges. Nothing new here to report, we continue to trade between 1.2900 and 1.3100 and as I mentioned in previous posts I still favor a break higher, but that may still be a long way off. The Loonie continues to range trade against the Euro but that may change with Thursday’s ECB announcement, and the Loonie should be able to pick up some strength against the Pound as the forecast is still for weaker Sterling.

Nothing on the economic calendar today so I look for USD.CAD to move a touch higher at some point in the morning session but still trade within the recent ranges.

USD
The US Dollar index is unchanged this morning as the markets react to the failed military coup in Turkey. The Turkish Lira, which had dropped quite heavily on global markets, recovered this morning as it seems the government is fully in control and ready to now punish everybody and anybody who supported the coup. I could have seen a scenario where the Euro would have dropped precipitously on this development as it would have been another big blow to the EU recovery and it may also have dragged NATO into the crisis which would have been very messy.

CAD
The Canadian Dollar continues to hold onto it gains from last week and USD.CAD opens the new week at the same level as we closed on Friday. Not much to report on the Loonie at the moment, as it did last week it should continue to range trade in the familiar territory until we get a development that moves it in one direction or another. Most pundits still favor a move higher for USD.CAD but the Loonie has been doing a great job fighting off those expectations.

Nothing of note on the economic calendar today, the week’s activity will be highlighted by Thursday’s ECB interest rate announcement and a speech by Governor Draghi; this will be his first post-Brexit announcement, and the markets will be looking to see if the EU economy is going to need more stimulus. On Friday’s we get the Canadian Retail Sales and Inflation reports so we should see some volatility towards the end of the week, make sure you get your orders in early. Contact us if you want to discuss any levels.

GBP
The other big currency move overnight was Sterling where a Bank of England official came out and said the BOE might not have to cut interest rates next month which kind of flys in the face of what Carney said last week. GBP.USD was a full cent higher at one point and GBP.CAD was up about 50 pips so a strong night for the Pound to start the weeks.

GBP
As I write, the Bank of England has announced that they are keeping both their interest rate and stimulus plan at current levels but they have indicated that they will “loosen monetary policy” in August with a “package of measures” once it takes the time to see how the Brexit vote is churning through the economy. There was a growing camp that expected the BOE to do something today, but I think it makes more sense to get information on the economy before making any decisions. On this news GBP.USD jumped over 100 points to trade at 1.3360 and GBP.CAD was 150 points higher so overall a positive result for Sterling.

USD
USD.CAD is marginally lower this morning but of more significance, the Loonie was able to hold onto its gains from yesterday after the Bank of Canada delivered a positive statement on the Canadian economy. With stocks looking to set new record levels south of the border it certainly appears that the Loonie can do better in the coming days, but again we have not been able to break out of this 1.2900-1.3100 trading range for some time now until we see a break either side I think USD.CAD trading will remain subdued within this range.

CAD
Up today on the economic calendar we get some US inflation data in the Producer Price Report for June, with inflation contained for the time being I don’t think this report will have much of an impact on trading, I look for USD.CAD to test a little lower especially if the stock markets can hold onto their early gains.

USD
The US Dollar index is marginally weaker this morning as Sterling continues to move higher. The Pound is getting some strength from the election of Theresa May as the new UK Prime Minister and her plan to appoint a Cabinet Minister to take the UK out of Europe. How far the Pound will rise will be dependent on the actions and comments from Bank of England Governor Carney tomorrow, it should be an exciting day.

CAD
Nothing to report on USD.CAD, once again it ranges trades in narrow ranges awaiting its next breakout, the impetus to move may come today in the form of the interest rate announcement from the Bank of Canada. We are not expecting any change to current interest rate policy but with this being the first BOC meeting after the Brexit vote the Canadian market will be looking for the Banks comments on how the vote will affect the Canadian economy and what will happen with interest rates in the coming months. Overly negative comments from the Bank of Canada should be enough to push USD.CAD higher.

In addition to the BOC we also get some secondary US data but for us here in Canada the market will solely on the BOC announcement. We should get a period of enhanced volatility so make sure you get your orders in early.

CNY
In worrying news out of China, exports declined 4.8% in June (year-over-year) while imports fell 8.4%, these numbers especially the export numbers will not be good for the Chinese economy if China starts to slow down look for it to take the commodity currencies lower with it.

USD
The US Dollar index is weaker this morning; the Greenback was led lower by Sterling, which has jumped 1.3% since its 31-year lows of last week. Sterling received a boost from the election of Theresa May as the new UK Prime Minister bring some stability to the question of who would lead the UK out of the European Union. Focus in the UK will now shift to the Bank of England announcement on Thursday as there is growing expectation that the BOE will cut interest rates and further increase stimulus spending in an attempt to soften the blow of Brexit to the UK economy.

CAD
USD.CAD yet again trades in recent ranges, at the moment it just cannot break in either direction. Yesterday it looked like the currency pair was going to break higher but overnight the oil price jumped a little and with the overall weakness in the US dollar last night USD.CAD moved back lower, given all the turmoil in the currency world at the moment the Loonie continues to perform quite well for the most part. With the overnight strength in the Pound GBP.CAD continues to rise, but if we see a significant drop in Sterling this week, I would expect that trend to reverse, EURO.CAD continues to remain relatively stable trading in tight ranges.

With only US Wholesale Trade on the calendar this morning I look for USD.CAD to range trade again today, the Loonie may get a bit of benefit if the oil price stays high and equity markets continue to test new record highs.

YEN
The Yen continues to lose ground to the Greenback, with the ruling party collation gaining more seats in the upper house there is growing expectation that the Bank of Japan will further increase the stimulus package that it is currently deploying in Japan. I look for the Yen to remain weak over the short-term.

USD
The US Dollar index starts the new week off stronger as the Greenback continues to benefit from the very strong Employment report on Friday. The big mover overnight was the Japanese Yen as USD.JPY went from 100.60 on the Tokyo opening to trade as high as 102.50 after an election win Japanese Prime Minister Abe ordered a new round of fiscal stimulus spending to try and spur the economy. The previous plan was seen to have no effect on business so I am not sure just what this next round will do, Japan has had a stagnant economy for over a decade, and the future does not look all that different.

CAD
The Canadian Dollar continues to lose ground as strength in the Greenback pushes the Loonie lower, all of USD.CAD, EUR.CAD and GBP.CAD are higher this morning, so we continue to lose ground slowly to everything. Both the strength of the US Dollar and a weaker oil price today have contributed to this overnight decline, that being said USD.CAD still trades within recent ranges, and I will need to see a clear break above 1.3100 before being convinced that the Loonie is starting a further big decline.

Up this week the economic calendar is highlighted by The Bank of Canada interest rate policy announcement on Wednesday, we also get the Bank of England interest rate announcement on Thursday where a possible interest rate cut is back on the table after the BREXIT vote. In addition, we also get the regular slew of US secondary data and close out the week with US Retail Sales report for June. It will be another volatile and busy week so make sure you get your orders in early and take advantage of the volatility.

USD
The US Dollar Index, for the most part, is unchanged this morning. In the UK manufacturing data for May was a bit better than expected so GBP.USD jumped a bit higher as did European stock markets, we continue to see more back and forth volatility surrounding the events in the UK.

CAD
The Canadian Dollar had a strong afternoon yesterday and held that strength overnight, USD.CAD continues to range trade back and forth without any signs of a breakout. The Loonie was able to benefit from strong stock markets and a bit of a bump in the oil price. The Loonie was a bit stronger against the Euro and marginally weaker against the Pound this morning but again trades within recent ranges, in reality, EURO.CAD has been confined to relatively narrow trading range over the past month but just the opposite for GBP.CAD, which has seen a significant uptick in volatility.

Nothing of significance on the economic calendar today, all eyes will be focused on the US and Canadian June Employment reports due out tomorrow morning. Look for USD.CAD to remain stable ahead of those reports but tomorrow we could see enhanced volatility so make sure you take some risk of the table by locking in today.

Euro
I read a fascinating article last night that caught my eye, in the UK some significant property Funds have told investors that they cannot redeem their shares at the moment. It seems that there has been a run on these funds by investors wanting their money back, and as these funds are invested in commercial properties they do not have ready cash on hand until the assets are sold. These funds are now moving to a weekly re-evaluation of their assets (instead of monthly) which tells me that we could be seeing a crash in commercial property values in the UK post-Brexit, my concern is that this could be a start of a loss of confidence in the UK financial system and we will see this spread across more financial products. Also of worry now is the state of banks in Italy, there seems to be growing concern that they will be in in short-term trouble, If a bailout is needed then we are going to have a real mess on our hands.

USD
The US Dollar index is, for the most part, unchanged as we start the new trading day. Overnight the markets went a bit screwy on more Brexit fears, stock markets across Europe were all lower, the price of oil is lower, gold has jumped higher, and GBP/USD was again hit hard down 200 points (a new 31-year low but it has since recovered from its lows). Overall until this mess gets sorted out investors are moving into safer assets which of course include US Treasury Bonds.

CAD
The Canadian Dollar is starting to show signs of weakness as USD.CAD begins to move higher, with the price of oil dropping and the Greenback gaining momentum it is only a matter of time before USD.CAD does move higher, up until knowing the Loonie has been faring quite well. The Loonie is flat against the Euro but quite volatile against Sterling, at one point this morning GBP.CAD had dropped 150 points but with further weakness in the Loonie this morning the currency pair has rebounded back higher, I look for continued big swings against the Pound over the next little while.

Up today we get some trade data out of both the US and Canada, but we also get the release of the minutes from the last Federal Reserve meeting on interest rates. Usually, these would catch the attention of the market, but as they are the last session before the Brexit vote I don’t think they will have much relevance on the market today, I would think the committee members have changed their stance on the next interest rate hike in the US since Brexit.

Euro
In Europe the Euro is marginally lower against the Greenback as the German Factory Orders report came in slightly below expectation, the Euro should trade weaker to the US going forward but stronger against the Pound. The big winner of this move to safer assets is the Japanese Yen as USD.JPY has dropped from a high of 103.30 last week to trade at 100.40 this morning, this will not help to make the Japanese Government euphoric, the favor a much weaker currency to help with exports.

USD
The US Dollar index is marginally higher this morning as comments from Bank of England Governor Carney have weighed on the Pound. Earlier this morning Carney mentioned that the Bank of England is putting its post-Brexit plans in place to keep the UK financial system stable, but it may not have all the tools to avoid periods of increased disruption and volatility. The Bank warned that high levels of household debt could make consumers “vulnerable “ to any economic downturn. As a first step in helping the commercial banks, the BOE reduced the capital holding requirements for the banks which should free up about 150 Billion Pounds that the banks can lend into the economy. On this report GBP.USD fell to fresh 31 year lows; it has recovered a bit this morning but as I have said before looking for Sterling to trade weaker over the rest of the year.

AUD
In Australia, the Reserve Bank of Australia kept its key lending rate at 1.75%, but it has hinted at a future interest rate cut. There was not much reaction from the Aussie Dollar after the announcement, AUD.USD trades at .7500 and AUD.CAD was at .9670 slightly weaker from our close yesterday.

CAD
The Canadian Dollar continues to trade in familiar territory, last night it gave back some of the gains it made yesterday against the US Dollar, it continues to range trade waiting for its next breakout. The Loonie has lost a bit of ground to the Euro as it is off its best levels of last week and but with the weakness in the Pound it has made some gains against Sterling. Given the current level of GBP.CAD, it is hard not to buy Pounds at the moment but more than likely the exchange rate should move lower over the coming weeks.

Yesterday I looked at the first post-Brexit predictions for USD.CAD from the major Canadian banks and each of them had USD.CAD trading higher over the coming year with RBC the saying USD.CAD rate will hit 1.3600 by the end of the third quarter of this year. Long-time readers will know that I do not place much credence in this predictions as they are inevitably wrong, but I do find it interesting that not one of them sees any prolonged strength for the Canadian Dollar into the 4th quarter of next year.

Up today we get some secondary US data in the US Factory Orders report for May, barring any surprises we should have a relatively stable day with USD.CAD continuing to range trade back and forth.

Reminder
A reminder that if you need to send any US Dollars today is the day to do it, we are closed tomorrow, and the US is closed on Monday.

USD
The Us Dollar index held steady overnight as the markets continue to calm down over the BREXIT vote. GBP.USD pushed a tad higher on a slightly better than expected GDP report which was taken before the vote, it will be interesting to see what the UK GDP is in a year’s time when a lot of the breakup will be in place. In other surprising news out of the UK, Boris Johnson the former flamboyant Mayor of London and the leader of the Leave campaign announced that he will not seek the leadership of the Conservative party, he had been the frontrunner to replace Prime Minister Cameron, but now the election will be wide open. Unlike Canadian politics, the Conservative party will not hold a convention but instead they MP’s will hold a caucus and elect the next Prime Minister. If this drags on it could pull Sterling down with it.

CAD
Nothing to report on the Canadian Dollar, USD.CAD continues to range trade over familiar ground and right now it does not show any signs of a significant breakout in either direction. The Loonie is marginally stronger against the EURO and Sterling this morning but again still trades in recent ranges with no sign of a breakout.

Up today we have the Canadian GDP report for April, so we may have a little pre-holiday volatility if the number disappoints. We are expecting a year-over-year growth rate of 1.4% (last month it was 1.1%) which is nothing special and if I am not mistaken does not even keep up with our rate of inflation, so there is no real growth in the economy.

A quick correction from yesterday’s commentary, the US Employment report which typically comes out the first Friday of the month has been moved from the 1st to the 8th so that will not affect the markets tomorrow when Canada is closed.

USD
The US Dollar Index is weaker this morning as the markets start to calm down after the BREXIT vote, it is two days in a row now that the Pound has moved back higher, and it looks like stocks are set for another positive day in North America. Now that the knee-jerk reaction to the vote result is over markets will start to stabilize and will then begin to focus on the game plan and the effects of that game plan on the UK leaving the EU, this could take several years which will keep financial markets on tenterhooks for a long time yet.

GBP
GBP.USD was up another 120 points last night but still has a long way to go to recover from the immediate impact of the vote result. EURO.USD is only up slightly but still has stabilized after the vote, once all the rhetoric out of Europe has died down then investors will want to see how the EU will handle the pull-out and what steps they will take to strengthen the EU. Not helping the Euro this morning is the latest terrorist attack in Istanbul, given all that is happening more flight of money to safety can be expected over the short-term.

CAD
The Canadian Dollar is stronger this morning but for the moment the currency pair seems to have stabilized and trades between 1.2900 and 1.3100 with no signs of a breakout either way. I am a bit surprised as I thought the BREXIT vote would have pushed the exchange rate much higher so perhaps we see some flight to safety in Canadian Dollars and the Loonie is benefitting from the latest developments. The Loonie is holding its ground against the Euro and has lost a little ground to the Pound as overnight strength in Sterling as pushed GBP.CAD higher.

Good to see some M&A activity going south of the border this morning, CIBC said it would buy Chicago-based PrivateBancorp Inc in a cash-and-stock deal worth $4.9B Canadian. We will never know for sure but the move up in USD.CAD yesterday could have been CIBC buying US Dollars for this transaction.

Only secondary data on the economic calendar for today so I would not expect much reaction on that front, I continue to look for USD.CAD to move back and forth within recent ranges but I look for any upset out of Europe as the situation unfolds to bring added volatility to the market.

A few housekeeping items, our office is closed on Friday for the Canada Day holiday and the US Wire system will be closed on Monday for the 4th of July holiday, if you need to send some US wires in the short-term you need to do it before Friday, or you will be waiting until next Tuesday. Also with our office closed on Friday make sure you get you orders in early, the US will be releasing their June Employment report and after the June report markets will be very nervous and we will see incredible volatility if the number disappoints again.

USD
The US Dollar index is weaker this morning as the rout of financial markets has taken a pause and stabilized a little bit today. Both global equity markets and the Pound have recovered today, in times of extreme crisis, markets tend to overshoot their moves, so I am not surprised that we have had a bit of a pullback today. In overnight trading GBP.USD moved from its lowest level near 1.3150 (last seen in 1985) to trade as high as 1.3350, the Dow Jones is pointing up over 200 points this morning which is a good rebound after some $3 Trillion was wiped from global equity markets over the past few days. In further terrible news for the UK economy, the bond rating agencies S&P and Fitch both downgraded their credit rating on UK debt citing “BREXIT posed a risk to the constitutional and economic integrity of the UK”. I think there is a lot of pain ahead for the UK before they will come out the other side on this. One group that has really suffered quickly in all of this is UK pensioners that are living outside the UK, they have seen their holdings drop by 15% or more in a matter of a few days and if they live in Europe they will at some point in the future have to make arrangements for health care while outside of the UK, not a pretty picture as that can be very expensive.

CAD
With the weak US Dollar, the Loonie had a good overnight session with USD.CAD dropping 100 points from our high of yesterday, it has since given about half of that gain back as USD.CAD continues to range trade back and forth. The Loonie had an excellent night against both the Euro and Pound (more so against the Euro), and it continues to hold onto that strength this morning.

GBP
Up today we get the US GDP report for the 1st quarter as well as the Consumer Confidence Report for June, for the GDP report, we are expecting an annualized growth rate of 1.0% (last 0.8%) which in the big picture is not an excellent number. With the BREXIT vote squarely in focus I am not quite sure how much influence US economic data will have on the market at the moment, I guess a weak number will hit the US Dollar hard but in reality, if there is a bad GDP number just were will investor flow go? Investors won’t go to Europe or the UK, so maybe the Japanese Yen and Canadian Dollar would do well if the US has a bad GDP report, whatever happens, volatility will remain high and we will continue to see some big swings in the market.

CAD
The Canadian Dollar is losing a little ground to the US Dollar as it is back above 1.3000 this morning but considering what has happened it is still doing relatively well. The Loonie has extended some small gains against the Euro and made further gains as you would expect against the Pound, both trends that will probably continue for the short-term. I have not read any comments from Bank of Canada Governor Poloz on the crisis, know may be a time to show some leadership and reassure the Canadian market that we are well positioned to withstand this volatility.

USD
The US Dollar Index is stronger this morning as the world’s financial markets continue to digest the vote by the UK to leave the EU.

More of the repercussions include;

GBP
-Sterling has fallen to a new 31-year low against the US Dollar, and more and more banks are coming out and lowering their forecasts for Sterling to trade lower over the coming year.

-Scotland has indicated they would hold another referendum on staying in the UK and have indicated that they will approach the EU about continued membership in the common community.

-UK Finance Minister stated for the first time that markets remain stable, but further volatility will continue.

-The UK Labour Party is in full revolt with many shadow cabinet minister resigning in the wake of their ineffectual campaign to keep the country in the EU.

Euro
EURO.USD is down almost 3% this morning, but it is not all bad news for the Euro as EURO.GBP has climbed 2.25% to its highest level in over two years.

Nothing on the economic calendar for today, currency markets will continue to watch the developments from the UK and look to see if we get any recovery in global equity markets. Volatility and lack of liquidity will continue to be the watchwords for the next little while.

USD
The US Dollar index is much higher this morning as in a surprising development the UK has voted (51.9% to 48.1%) to leave the EU. Right up to the very end the Polls and betting markets were all showing that the “Remain” camp was going to pick up the win. Here are some of the highlights of what is happening right now;

GBP
-Sterling has dropped to a 30 year low; the lowest level was seen for GBP.USD was 1.3200, last night I saw it trade at 1.5000, so that is an 18 point swing (12%) in one night which is a massive move, this type of move was last seen in 1992 when George Soros attacked Sterling. GBP.USD has moved off these lows and now trades near 1.3900, but liquidity 's hard to come by and will remain so throughout the day. I look for Sterling to trade much weaker over the coming months as this gets all sorted.

Bank of England Governor Mark Carney addressed the media and said the Bank stands ready with 250 Billion Pounds of liquidity if the markets need them.

• - Stock markets around the world have crashed, Germany and France we off as much as 6% at one time, The London FTSE had the biggest one day collapse since 2008 when Lehman Brothers went bankrupt, Stocks have recovered a bit and area off their lows.

• - The Dow Jones at its worst point overnight was down 700 points but now points down 500 points on the opening in New York
•  
• - The price of Gold is up over $50; investors tend to go to gold in times of chaos.
•  
• - Oil is down $2.00 a barrel
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• - Prime Minister David Cameron has resigned
•  

CAD
Considering all that is going on this morning the Canadian Dollar has been quite resilient. USD.CAD at its worst point was only 300 points higher, EURO.CAD went lower during the night but is right back where we closed last night and finally GBP.CAD dropped to a low of 1.7250 but has recovered by 8 points and trades near 1.8000 this morning (6:00 am). In watching the price action this morning, liquidity is at a premium, and you will continue to see significant price swings, it will be a tough day.

USD
The US Dollar Index is weaker this morning as the world watches as the UK heads to the polls to vote on whether they wish to remain in the EU. The Greenback received lost some ground as the final pre-election poll came out yesterday and showed the “Remain” campaign had a slight lead. After the Polls were released GBP.USD gained 0.75% to trade at 1.4825 and EURO.USD rose 0.66% to trade at 1.1370 so a good night for Europe.

In my understanding of the vote, the pools are open from 7:00 am to 10:00 pm and there will be no official exit polls being published, but I am sure that there will be lots of rumor and innuendo throughout the day that will spook the currency markets. My plans are to come into the office around 3:00 Friday morning and see how the Loonie is fairing in all the commotion. I would encourage all readers to make sure you have taken some risk off ahead of this vote as it is still uncertain what the outcome will be.

CAD
The Canadian Dollar had a great night as it was boosted by the weak US Dollar and stronger oil prices, USD.CAD trades to its lowest level in 10 days but does remain entrenched in recent ranges. With the overnight strength against the Greenback, the Loonie was able to stave off any losses to both the Euro and Pound so both EURO.CAD and GBP.CAD remain where we left them yesterday.

Up today we do get the US Leading Indicator report for May, but unless it is appalling, then I think the market will focus on the BREXIT result which should start to come in about 1:00/2:00 our time Friday morning. Please also keep in mind that we could experience times of extreme volatility and serious lack of liquidity in the market as the day goes on, hopefully, this will not be the case but at times it may be very difficult to execute any transactions and the rate that you get could be very different than you were expecting. Plan for the best but prepare for the worst is a good idea in the next few hours.

USD
The US Dollar Index is marginally weaker this morning, both Euro and Sterling are higher as we get closer to the UK vote. A poll released this morning showed the “Stay” campaign lost a little ground to the “Leave” campaign (45% to stay-44% to leave and 11% undecided). From here on in the markets will react to every bit of news on the issue, and we will start to see some crazy moves in the currency markets. I am still looking at the odds at the Bookmakers, and the bet to stay is still listed at 1/4, so I will go with them and say they UK will not be leaving the EU, but it will be close call right down to the wire. It all brings back memories of the situation in Canada during the last Quebec vote; it is playing out in a very similar fashion.

CAD
USD.CAD had a quiet night with the Loonie picking up a little strength against the Greenback but did lose a little ground against both the Euro and Sterling. For the most part USD.CAD should remain stable ahead of tomorrow’s vote, if the UK votes to leave the EU, then you should see the US Dollar stage a big Rally and USD.CAD will be much higher, under extreme volatility conditions we could easily be up above 1.3000 possibly at 1.3500 very quick. If the UK votes to stay then, the US Dollar should give a bit back to both Sterling and the Euro so USD.CAD should drop a bit, but the drop would not be as dramatic as the rise should the “Leave” campaign win. Either way, if you know your exposure over the next little while I think I would be taking some money off the table and locking in at current rates, the vote may be too close to call.

Up today on the economic calendar, we get the Canadian Retail Sales report where we are looking for a 0.8% gain in April, for the most part unless there is a big surprise the market will ignore this report and should range trade getting ready for tomorrow.

USD
The US Dollar index is marginally lower this morning as the currency market is now entirely focused on the UK vote on Thursday. Sterling continues to recover as more polls came out yesterday showing the “REMAIN” campaign moving back in front, GBP.USD which had reached a low of 1.4050 last week but now trades near 1.4800 which is a great run in a short time for the Pound. The Pound is also higher against the Canadian Dollar as last week it was trading at 1.8050 and now is trading near the 1.8900 level. Sterling is also picking up some gains against the Euro as EURO.GBP fell to its weakest level since the end of May trading at 0.7668, and this was despite some positive economic news coming out of Europe.

George Soros, one of the world’s most famous currency strategists, stated yesterday that the Pound could fall by 20% if the referendum shows the country wants to leave the EU. For those with a long memory, Soros was the guy that bet against the Pound before the Government devalued Sterling in 1992, he took on the Bank of England and won making billions for himself.

CAD
The Canadian Dollar is marginally stronger this morning on the back of the weaker US Dollar; we will probably have to wait to see the full results of the vote to determine the next move for USD.CAD, we will most likely trade within a familiar range for a while.

Nothing on the economic calendar for today but we do have Federal Reserve Chairperson Yellen testifying before Congress this morning, the currency markets will be looking for any hints on when the Fed is planning to increase interest rates.

USD
The US Dollar Index is weaker this morning; the Greenback was led lower by the single biggest one-day jump in the value of Sterling since the market crash of 2008. GBP.USD closed on Friday at 1.4350 and opens today in North America at 1.4850 as results from polls over the weekend show the “REMAIN” campaign moving out in front, the best odds that you can get on a bet to stay in the EU are now 2/7 so apparently it looks like the result is conclusive. Financial markets love this development, stock markets around the world are all higher this morning, commodities moved higher and the Euro as well benefited as EURO.USD jumped 100 points higher at one point overnight. All is right with the world, well at least until the next poll!.

CAD
The Canadian Dollar was able to benefit from the weaker US Dollar as USD.CAD at one point on Friday looked poised to break above 1.2900 again but now had picked up a bit of momentum, and the Loonie looks to be trading stronger. The Loonie did lose lots of ground to Sterling overnight as GBP.CAD is about 200 points higher from our close on Friday but with the overnight strength against the Greenback, the Loonie did pick up a little strength against the Euro as EURO.CAD is a bit lower to start our day. With BREXIT fears to calm down for now and with the US Dollar still under pressure from weak economic reports and the Fed possibly backing off on interest rate hikes we could see USD.CAD start to range trade again with a small bias for a stronger Canadian Dollar.

With just Canadian Wholesale trade on the table today and stock markets ready to soar I look for USD.CAD to continue to move a bit lower, as it is a light week for economic reports trading focus will squarely move to the BREXIT vote, and as we get closer to Thursday, we should see a reduction in currency movement as traders square up their positions ahead of the vote. Heaven helps us if the vote comes in to leave the EU (not likely at this point) as the markets will go ballistic.

USD
The US Dollar Index is lower this morning as the markets reacted to the disappointing US economic data released yesterday. In the US CPI report, inflation came in weaker than expected, year-over-year inflation stands at 1.1% in the US which is well below the Fed’s target of 2.0%. Also, yesterday the number of people applying for jobless benefits increased last week by 13,000 if this trend were to continue the Fed would be very reluctant to raise interest rates next month. Both EURO.USD and GBP.USD are considerably higher from their lows of yesterday.

CAD
The Canadian Dollar was a big winner from the weak US economic data; it has pulled back much of its losses against the Greenback over the last 24 hours. It has made up considerable gains against the Euro but has lost out a little to the Pound as overnight strength in Sterling was too much for the Loonie to overcome. Look for the volatility to continue over the next few sessions and if the BREXIT vote goes ahead as planned volatility and lack of liquidity will become the order of the day.

Up today we have the release of the Canadian CPI, in a speech this week, Governor Poloz asked for patience as he said the Canadian economy will recover over time in step with the US economy. If the Canadian data starts to disappoint on the same scale as the US data is starting to do then, I don’t think the currency markets will be very patient with the Loonie.

GBP
Sterling was pushed higher early this morning on speculation that Prime Minister Cameron might push back the referendum date due to the death of MP Jo Cox. There is speculation that this death may change public opinion away from the “Leave” campaign which had been seen as pulling ahead in recent days. The best betting odds on staying in the EU have moved to 4/9 so clearly the “Stay” campaign has picked up some momentum for this tragedy.

USD
The US Dollar index is stronger this morning as the Greenback shook off its weakness after the Fed announcement yesterday and spent the overnight session recovering. EURO.USD has fallen to trade at 1.1180 this morning and GBP.USD traded as low as 1.4100 before recovering a bit today. Even though the Fed downplayed the number of interest rate hikes, they plan for next year they say they are still on target for two hikes this year, so that has given the dollar a bit of a boost and will of course greatly depend on the BREXIT vote next week.

CAD
The Canadian Dollar is very weak to start the morning; it appears to be bearing the brunt of the strong US Dollar, USD.CAD is now at a two-week high and once again we see the Loonie quickly shed its gains made over the past few sessions. The Loonie is hanging in against the Euro but has lost a little against the Pound. Whatever happens, now no one knows but one thing is certain with BREXIT coming closer, and closer volatility in the currency markets will be greatly increased.

USD
The US Dollar index opens in North America marginally weaker this morning as the financial markets get set for the US Federal Reserve announcement on interest rates this afternoon.

CAD
USD.CAD continues to move higher as the oil price dropped a bit more last night and the Greenback squares up speculative short positions ahead of the Fed announcement, the Loonie also lost a little ground to both the Pound and Euro but does remain at the low end of recent ranges against these currencies.

Everything today will, of course, be dominated by the Fed meeting but ahead of that, we get a slew of US secondary data including Producer Prices (inflation data, Capacity Utilization, and Industrial Production. In Canada, we also get some manufacturing data so we should have a fairly busy morning and then I would expect the market will come to a complete halt as we await the Fed.

For the Fed I am not expecting any changes to the interest rate policy, I was never one to think that they were going to increase rates in June at any point, being so close to the BREXIT vote they need to see what happens before making any decisions. They would have looked very foolish to increase interest rates in June only to reduce them a week later if the “Leave” campaign were to win, on top of this the crappy May jobs report which all but killed an interest rate hike. That being said I still expect them to increase rates in July so I will be looking at their statement to see if that is the consensus. I get a sense that they are just itching to increase interest rates one more time this summer so I think their statement will be bullish for an interest rate hike, and we will see USD.CAD jump higher.

GBP
Sterling had strong showing last night as the UK Unemployment rate last month fell to 5.0% from 5.1%, nothing dramatic but it was enough to give the Pound a bit of a boost ahead of the BREXIT vote. No overnight change on the betting odds for the vote, the best odds you can get right now on the “Stay” vote are 4/7, so the bookmakers still see the country voting to stay in the EU.

USD
The US Dollar is stronger this morning as the markets get closer to the Federal Reserve announcement tomorrow and the Brexit vote next week. The pressure of the vote is starting to build on the Euro and Pound, another Poll published yesterday showed the Leave campaign ahead by 46% to 39% with 11% undecided, it is going to be an exciting week with lots of rhetoric leading up to the vote.

I was listening to the CBC this morning and in their business commentary, they said that the 10-year German bond yield has fallen into negative territory for the first time. It is one thing to have short-term interest rates go into the negative territory to help stimulate investment in the economy but for 10-year bonds to do so is unheard of. It tells me that bond investors do not see the EU getting out of their current mess for some time to come.

CAD
The Canadian Dollar continues to trade weaker this morning against the US and USD.CAD is now about 100 points higher than our close on Friday; the Loonie is getting hit by a drop below the $50 price in oil and the squaring up of short US Dollar positions by speculators ahead of the Federal Reserve announcement. The Loonie continues to hold its own against the Euro and Sterling, but that is more a case of those particular currencies becoming weaker against the US Dollar than the Loonie is.

Up today trading will be most influenced by the US May Retail Sales report, a weak number will increase the chances of the Greenback trading weaker ahead of tomorrow’s’ Fed announcement. Barring any surprises from today’s reports USD.CAD should trade in a narrow range as the market gets positioned for tomorrow’s long-awaited event.

USD
The US Dollar, for the most part, is unchanged as we start a new trading week. It is slightly weaker against the Euro and a little bit stronger against Sterling. Over the weekend another poll came out showing that the leave campaign was moving ahead, The Financial Times now has the numbers in a deadlock at 43% each with 14% undecided. I had a look at some of the betting shop odds on the UK leaving the EU and while they have come down a bit they still show that there is a 70% chance that the UK will vote to stay in the EU. I think the bookmakers know what they are doing so I will stick with them and still say that the UK will vote to remain in the EU next week.

CAD
The Canadian Dollar is unchanged against the US Dollar, it has picked up a little bit against Sterling and lost a bit of ground to the Euro. I would say that the Loonie starts the week on a positive note as the Greenback still trades with a weak bias resulting from the very poor jobs report and the less likelihood of a US interest rate hike this month. I would caution US buyers not to get too greedy, we have seen this scenario unfold before and each time the US Dollar snaps back quickly.

A very busy week on the economic calendar and we have Central Bank Week ahead of us, not only do we get the Federal Reserve on Wednesday but we also get the Bank of Japan, the Swiss National Bank and the Bank of England all reporting on interest rates, with the upcoming Brexit vote so close in the balance I doubt any of them will be changing policy but it should be a very nervous week ahead.

USD
The US Dollar is marginally stronger as the number of people applying for jobless benefits in the US fell by 4,000 yesterday giving hope to investors that perhaps the weak jobless report from last Friday is no the start of a new trend. The drop in the Greenback brought on by that report seems to have stabilized for the moment so we will wait for further US economic data to see where the market goes. In Europe the Euro is a bit lower as ECB Governor Draghi yesterday said weak growth in the EU economy will cause lasting damage to the European Union, comments like this may give British voters something to think about. On the Brexit vote, we will most likely get some new polls over the weekend, so we will see if there have been any changes in sentiment, as of June 6th the Financial Times was still reporting the scorecard was 45% to 43% in favor of staying in the EU.

CAD
The Canadian Dollar has given back a bit of its strength from earlier this week, which is not surprising as USD.CAD had fallen quite a long way very quickly, whether or not that will continue will depend in the short-term on the results of the Canadian Employment report this morning. The market is expecting no job growth last month which could easily turn into job losses if we get a reading like the US, with slowing global growth our exporters surely have to start slowing down, and that may lead to job losses. A very poor number will push USD.CAD much higher.

Bank of Canada Governor Poloz sent a shot across the bow of the Canadian economy yesterday. In his bi-annual review of the Canadian Financial System he said that the housing market in Vancouver and Toronto are unsustainable at current price levels, if he is correct and we start to see a correction or even a crash in those markets it won’t just affect those two cities but it will affect our whole economy and not in a good way. It will be very interesting to see how the liberals handle this issue, it can become every serious very quickly.

USD

The dollar is trading near its five-week low against the majors aimed at the outlook the FED will not be increasing its interest rates on the 15th as originally anticipated. Released early this morning are the US unemployment claims and wholesale inventory sales. Both these numbers are expected to be similar to month’s previous. However, if Friday's jobs numbers are any indication prepare for these number to potentially come in much lower resulting in further decline of the USD.

CAD

In Canada, yesterday's home sales came in slightly lower than anticipated in addition to building permits coming in at a negative. I would not attribute this in any way to a slowing of Canadian home sales. The big news out for Canada this morning will be the BOC review and BOC Gov Poloz is due to speak late morning and will shine some light on the Canadian economy. Could see a bit of movement but nothing crazy.

Euro

ECB President Draghi spoke this morning and said years of weak growth have eroded euro zone productivity, raising the risk of permanent damage to its economic health. His comments underscored his argument that monetary policy alone cannot end the bloc's economic weakness.

USD
The US Dollar is again weaker this morning as the momentum swing from the poor jobs report, and the less likelihood of an imminent interest rate hike in the US continue to weigh on the Greenback. EURO.USD has jumped to trade at 1.1375 the highest level in a few weeks, GBP.USD is now trading at levels last seen at the turn of the year. In overnight news manufacturing data out of the UK came in better than expected but any gains for Sterling were muted by the ongoing uncertainty over the referendum. As of June 6th the Financial Times “poll of polls” still reports that Stay campaign is ahead 45% to 43% with 12% undecided.

CAD
The Canadian Dollar is the big winner in all of this recent activity. USD.CAD is down over 300 points since Friday’s disastrous US Jobs report; The Loonie is also much stronger against the Euro and holding its own against Sterling. This move is not about Canada, but more about a weaker US Dollar so be cautious in your approach. If you are a US Dollar seller you need to protect yourself against possible further drops in the rate and if you are a US Dollar buyer do not get too greedy, you have had a big win this week so take some money off the table. It is much better to be conservative as any negative data or comments from the Bank of Canada can reverse the trend for the Loonie very quickly.

The only items on the economic calendar today is some secondary Canadian data. The market will continue to feel the effects of the weaker US dollar, stronger Equity Markets and an oil price that is now approaching $51 a barrel. The Loonie should remain healthy but if this rapid drop in USD.CAD continues I would then start looking for a bit of an overdue pullback for USD.CAD.

USD
The US Dollar Index is at its lowest level since May 11th following yesterday’s remarks from Fed Chairperson Janet Yellen. In her speech Yellen said the Fed would not be raising interest rates until the economic uncertainty is resolved, she highlighted that a Brexit vote to leave the EU would cause added volatility in the global economy and was concerned with the slowdown in recent jobs growth data in the US. Overall she is still positive on the US economy and is still calling for more interest rate hikes but did not give any timetable of when they will occur, for the most part, it looks like a June interest rate hike is off the table and July is also now in question.

CAD
USD.CAD is a lot lower on the weaker Greenback (post-Yellen speech) and an oil price that is back above $50 a barrel, EURO.CAD is also lower which tells me that the Canadian Dollar has outperformed some of the other currencies, so the Loonie is on a great run at the moment. It still amazes me how one economic report (poor US jobs report) can completely turn around the sentiment of the currency market, given the lack of guidance on interest rate hikes from the US Federal Reserve the US Dollar could remain weak for a while.

Up today, we get some US secondary data which given the weak US jobs report from Friday take on added significance to the market, any further signs of weakness in the US economy will hit the US Dollar and USD.CAD will move lower.

GBP
Sterling is again stronger this morning as we get closer to the referendum date. The leave campaign was buoyed by some polls that were published on the weekend showing they were firmly in the lead for the first time, but the Pound has shrugged them off and seems to be picking up strength. All of this reminds me of the last Quebec referendum where it was neck and neck right down to the final day; I get a sense that the UK vote is pretty much 50-50 right now but if it unfolds like I expect the undecided will most likely move into the “Stay” camp.

USD
The US Dollar is marginally higher this morning as the Greenback has recovered slightly from Friday`s disastrous May Employment report. The market had been expecting an increase of 160K new jobs and the actual number came in much lower at 38K new jobs, for the US economy that is no job creation at all. On the release of the report, the market punished the Greenback with EURO.USD jumping almost 200 points and USD.CAD fell 150 points, the market looked at this and said there is no way the Fed can increase interest rates in June and drove the dollar lower. US Fed Chair Person Janet Yellen gives a speech today on US Monetary policy so it will be interesting if she is less optimistic about an interest rate hike this summer given the weak jobs report, we may see enhanced volatility when she speaks at 12:30.

CAD
USD.CAD is slightly lower from Friday`s close, and the Loonie has given back a little bit of Friday`s strength, with the weak US Dollar and the price of oil hanging around the $50 Dollar price we may be able to see the Loonie extend some more gains this week. If Yellen comes out today and talks down the likelihood of an interest rate hike this summer, then we could see USD.CAD break lower, for now, I think any moves higher will be capped, and short-term US Dollar sellers should be ready with orders close to the market to protect against a quick drop in the rate like we saw on Friday.

Lots of US Secondary data this week including Wholesale Trade and Consumer Sentiment, in addition, we get the publication of the Bank of Canada Financial System review on Thursday which should provide some insight into the current state of affairs.

Euro
The Euro strength was stemmed this morning as Germany reported a poor manufacturing number in April but that was offset by a stronger revision to the March number, so Euro gave back a little last night. EURO.CAD is also higher after the jobs report but does trade a bit weaker this morning as well, over the past few weeks EURO.CAD has not been able to sustain rallies higher so it will be interesting to see if the rate can break to new levels.

USD
The US Dollar index is marginally lower this morning as the market awaits the news from the ECB this morning on their latest interest rate policy. The US Dollar continues to carry momentum on the growing expectation of a US interest rate hike in the short-term. In addition, the markets are awaiting any news from the latest OPEC meeting on the establishment of production targets, from everything I read Iran is still the biggest stumbling block to any agreement so we may end up with no change after the meeting. The oil price has been quite volatile in the overnight trading session, at one point it was above $50 a barrel and now trades at $48.90, we could see this affect Canadian Dollar trading today.

CAD
Nothing to reports for USD.CAD, it continues to range trade ahead of tomorrow US Employment report, it has lost a lot of ground to the Euro and Sterling in the past 24 hours, but that is just a result of some strength in the Euro and Sterling, there have been no significant developments to talk about.

Euro
In addition to the ECB announcement due out in the next fifteen minutes we also get some preliminary US employment data in the ADP employment report. With the ECB, OPEC and employment all due out soon we could be in for a very volatile 24 hours, make sure your orders are in early to take advantage of it.

USD
The US Dollar is mixed this morning as we kick off the month of June (time is passing too quickly), the Greenback is higher against the Pound but weaker against the Euro. In overnight news Sterling was hit hard by a report from the Organization for Economic Cooperation and Development (OECD) that downgraded UK growth to 1.7% from 2.1% just three months ago, a significant drop as we head closer to the Brexit vote.

Yesterday the US economy reported some differing results; consumer spending rose at the fastest rate in almost seven years but at the same time consumer confidence in the economy fell more than expected. As we get closer and closer to the Fed June decision date US economic data will become more critical, especially Friday’s employment report.

CAD
USD.CAD, for the most part, was unchanged from our close yesterday, the Loonie did weaken off in the morning session as the Canadian GDP report disappointed the markets but it was able to recover most of the losses in the afternoon session as the oil price pushed above $50. The oil price has backed off significantly this morning, but the Loonie continues to hang in there. With the overnight strength in the Euro, EURO.CAD did move higher, so the Loonie lost some ground but against Sterling, it is quite a bit stronger so a mixed bag overnight.

We start the new month with more US secondary data due out today including the ISM manufacturing data, but for the most part, the markets will get ready for the ECB announcement on interest rate policy tomorrow and the US employment report for May on Friday. I still look for USD.CAD to range trade ahead of Friday’s report but overall I still favor a move higher for USD.CAD on the growing expectation of a US interest rate hike at some point.

USD
The US Dollar is, for the most part, unchanged this morning, overall the Greenback remains supported by an expected interest rate hike and strong US economic data.

In the only major economic news overnight, Euro-Zone inflation for May fell 0.1% which was in line with expectation but was the fourth straight month that inflation has dropped. This has to be a worry for a Central Bank that would want to see Euro-Zone inflation around 2%; I will be interested to see what the reaction of the ECB will be this Thursday when they announce on interest rates. Europe remains the same, the German economy humming along and the rest of Europe suffering.

CAD
USD.CAD is right where we closed it last night; it continues to trade in tight overnight ranges once again waiting for its next breakout. The Loonie opens the day a little bit weaker against the Euro, but with overnight weakness in Sterling the Loonie did pick up some small gains against the Pound.

Up today, we get a slew of economic data from South of the border including Consumer Confidence, Personal Income, and Personal Expenditures. Once again strong data will help push the US dollar higher, but we may yet see USD.CAD drop back a bit especially if the oil price can move higher and hold above $50 a barrel in the short-term, at $49.50 right now we are not far from that target level.

USD
The US Dollar is unchanged from its close on Friday as it continues to be buoyed by comments from Federal Reserve Chairperson Yellen that seem to indicate a US interest rate hike is back on the table in the short-term. The Greenback is also receiving a boost from the GDP data on Friday which beat expectation, so it is all good news at the moment for the States. Overnight volume was very light and should remain so throughout the day as it is a holiday in both the UK and the States.

CAD
USD.CAD traded higher in the overnight session, but as we start our day it is right back where we left it on Friday, The Loonie has lost a little ground to the Euro overnight but hangs in against the Pound as Sterling is a touch weaker. With the US Closed today I would be surprised if we have a large trading range, I think it will be a quiet trading day.

We have a busy week on the economic front, on Tuesday we get Canadian GDP for March and the 1st Quarter, we also get a slew of US secondary data to end the month on Tuesday. With the new month starting on Wednesday the monthly cycle resets and we start with the European Central Bank decision on interest rates on Thursday followed by the US Employment report for May on Friday. It should be a very busy week so make sure you get your orders in early.

USD
The US Dollar is marginally stronger this morning in quiet overnight trading conditions. A possible interest rate hike in June or July is back driving the dollar as US Fed Chairperson Janet Yellen is speaking at Harvard University this afternoon and she is expected to touch on the likelihood of an imminent US interest rate hike. My guess is that she will continue to say that if the economic conditions warrant it the Fed will consider increasing interest rates but if she gives any slight hint of a rate hike in June, the US Dollar will jump a lot higher. To my mind, the financial markets are solely focused on this issue to a fault at times.

CAD
USD.CAD has moved higher in the past 24 hours creating the pull back that I was looking for. If you have not already done so US dollar buyers should still consider locking up some of your short-term purchases, I still think there is plenty of room for USD.CAD to go higher. The Loonie is weak across the board as both EURO.CAD and GBP.CAD have moved 100 points higher in the last 24 hours.

Up this morning, we have the US 1st quarter GDP report, and if the report comes in stronger than expected, we should see USD.CAD spike higher, a substantial number will only add fuel to the fire of a US rate hike in June.

Have a great weekend (record high temperatures expected here in Ontario) and another reminder that if you need to send some US Dollars do so today as the US wire system is closed on Monday.

USD
The US Dollar index is marginally lower this morning as profit-taking on long US Dollar positions seemed to be the order of the evening. The US Dollar which is still being buoyed by the growing expectation of a US interest rate hike gave back a little strength last night; I think it is a case of investors looking at the market and seeing the US Dollar had a good run and decided to take some money of the table, both EURO.USD and GBP.USD were both slightly higher overnight.

CAD
The Canadian Dollar has had a great 24 hours; it has been in rally mode since the Bank of Canada statement yesterday and last night the Loonie received some strength from the oil price that hit over $50 a barrel, USD.CAD is a lot lower than where we left it last night. The Loonie has also done well against the Euro and Sterling as both of those currency pairs are at recent lows. Whether or not the Loonie can continue this run remains to be seen, but I would still advise US Dollar buyers to look at these levels as a great opportunity to pick up some of your short-term requirements.

A quiet day on the Economic Calendar with just some small US secondary data, the market will set up for the US GDP report tomorrow. Given the rapid drop overnight I would expect a bit of a pullback higher and then we can see if the Loonie momentum will continue.

GBP
In overnight news, Sterling initially fell on the report that 1st quarter GDP growth fell to 0.4% down from 0.6% in the last quarter of 2015, GBP.USD was able to recover from that quick drop as the Pound continues to gain support with the “Remain” side still showing a lead in the upcoming referendum.

Important AFEX News:
A quick reminder that Monday is a holiday in the US so we will not be able to affect any US Dollar payments, if you need to send any wires before then make sure you let us know early.

USD
The US Dollar is unchanged this morning as the expectation of a June or July interest rate hike in the US continues to be the underlying theme in the FX markets. Yesterday the Greenback received a little boost from the New Home Sales report which showed the highest level since April of 2008, further evidence of the US recovery taking hold.

CAD
USD.CAD traded in a tight overnight range which is not surprising given that we will get the release of the Bank of Canada statement on interest rates later this morning, the Loonie did stage a short-lived rally during the night as the price of oil jumped a bit higher but gave back a lot of those gains early this morning.

We are not expecting any change in interest rate policy this morning so the markets will be looking for forward guidance on what the Bank is thinking. I would expect the Bank to remain cautious in their approach to the economy, of particular interest will be if they say anything about the fires in Alberta and what affect the shutdown of Fort McMurray will have on GDP. The Bank has to be relieved that the oil price has stabilized above $40 a barrel so that will be helpful to the economy. They will be pleased that the rally in the Loonie seems to be over for the time being, but they may be a little bit concerned with the growing interest rate differential between Canada and the US.

Overall I don’t expect too much from the Bank’s statement, but I do think it will be a little more dovish than bearish, so I would look for USD.CAD to move a little higher on the news, US Dollar buyers should still be seeking to protect themselves against a higher exchange rate. As always I will send out a currency alert shortly after the announcement.


Euro
In Europe, the Euro is unchanged and did not receive any support from the latest Greek drama. The Greek parliament voted in another round of austerity measures which freed up more cash from the European Union and helped the Greek Government along its path of getting its finances in order. Sterling is again higher as it continues to benefit from polls showing that the “Remain” campaign has a lead in the upcoming referendum.

USD
The US Dollar index is stronger this morning as we start the last full trading week of May, the momentum that the Greenback had last week has carried over to this week and looks set to push the US Dollar higher once again. In trading yesterday, USD.CAD had a narrow trading range which is not surprising as the Canadian market was closed but the exchange rate did push a little higher, and that trend carried into overnight trading last night.

In two separate speeches yesterday US Federal Reserve officials both hinted that an interest rate hike in the US will come sooner than later, with one official calling for two or three rate hikes this year. Comments like this and the growing expectation of an interest rate hike in the US keep pushing the Greenback higher and will do so for some time yet.

CAD
USD.CAD has moved a litter higher as I mentioned above, it is being influenced by the momentum of the US Dollar and a subsequent drop from the recent high watermark on the oil price. Given the current trading environment, I think it will be difficult for the Loonie to go on any sustained runs so US Dollar buyers who did not take advantage of the run down below 1.2500 need to be ready with orders on any small pullbacks in the exchange rate. The Loonie is losing lots of ground to Sterling, if you require buying any Pounds, I would look to getting them sooner than later, as we get closer to the UK referendum we should see more volatility in all Sterling exchange rates. The loonie is losing a little ground to the Euro but not as quickly as against the Pound, we could yet see a bit of a pullback in EURO.CAD enabling Euro buyers to get some extra value.

Nothing on the economic calendar today but we have a busy week ahead highlighted by the Bank of Canada interest rate announcement on Wednesday and US GDP report on Friday. We also start to get the release of the Canadian Banks quarterly results which is always a good sign of the health of the Canadian economy, I will be watching to see the size of any loan losses due to the slowdown in the oil sands.

Euro
Euro trades lower this morning (EURO.USD is at a two-month low) as Germany reported some weaker than expected economic data. Sterling, on the other hand, is stronger against the US Dollar as the lasts poll shows the “Remain” campaign has a 13-point lead coming up to the June 23rd Referendum. The latest numbers show Remain at 55% while Leave is at 42%, if this trend continues over the last month then you should see Sterling well supported.

USD
The US Dollar is, for the most part, unchanged this morning in a quiet overnight session, the Greenback continues to gather momentum on the growing expectation of a US interest rate hike in the near future. EURO.USD moved off it 7-week lows last night but still looks vulnerable and GBP.USD gave back a little strength but is still quite strong for all that is going on in the UK at the moment.

CAD
USD.CAD had a narrow overnight trading range, but the Loonie continues to lose ground against most currency pairs, both EURO.CAD and GBP.CAD are slightly higher this morning. The Loonie will continue to suffer over the short-term as long as the Greenback has momentum and the oil price continues to remain volatile.

Up today we may see some added volatility surrounding the release of Canadian Retail Sales for March and the Canadian CPI report for April, Canadian data has been marginally disappointing lately, and further bad news on the Retail Sales front could help push USD.CAD towards 1.3200. Overall I think USD.CAD still has room to rise until we at least see what the US Federal Reserve does in the next couple of months.

Have a great long weekend,

USD
The USD dollar strengthened after various Fed Governors spoke about the possibility of two or three US rate rises this year. Fed’s Kaplan was the most vocal as he said that “After a June or July rate hike (the Fed) will want to assess timing, pace of further hikes. The FOMC meeting minutes due for release this evening will provide further direction. Nothing much for Canada in the release of economic data, we will have to wait for tomorrow's Canadian unemployment numbers to get some direction on the Canadian economy.

Euro
Still trading in recent ranges and on the whole directionless despite ECB’s Praet saying that the Eurozone banking sector was facing a severe profitability shock. The EU trade balance was disappointing as well coming in at +€22.3 billion and lower than expected +€23.1 billion but really the Euro is not master of its own destiny at the moment and calls from Fed Governors for a rate rise in June helped the USD to strengthen. Eurozone CPI will be watched today for an update on the path of Euro interest rates.

GBP
Opened up firm after the Daily Telegraph poll was positive for Bremain but was stopped by UK CPI which came in at +0.3% and less than the expected +0.5%. The drop was put down to a fall in airfares and GBPUSD managed to hold on to most of its gains even despite US Core CPI coming in as expected and helping Dollar strengthen. Today we have unemployment data due for release at 09:30 and after yesterdays drop in CPI average earnings will be keenly inspected for clues on interest rates.

USD
The US dollar is holding steading against the majors as investors await the release of US Building Permits, CPI, Housing Stats and Industrial production numbers which are all key indicators the Fed will use to determine if interest rates are rising or not. The Greenback was moved by the news that Warren Buffett had bought $1 billion worth of Apple shares which pushed US stocks higher. After a Goldman Sachs report saying that “disruption to supply had seen the market flip into deficit from surplus” oil had also had an excellent day and produced a “risk on” atmosphere. Fed’s Lacker commented that having delayed hikes in the first part of this year the Fed now needed to be thinking of catching up.

Euro
The Euro pushed higher on short covering but stayed inside Fridays range as a result of European holidays. The Bundesbank monthly report will probably not provide too many shocks today so we will look to US CPI for impetus.

GBP
With the majority of European markets on holiday, Sterling squeezed higher on the back of a higher oil price. The focus is still on the Brexit polls with an ICM phone poll coming in at 47% Bremain and 43% Brexit being followed by an online poll showing 47% Brexit 43% Bremain. This morning Sterling has pushed higher after a Daily Telegraph ORB poll reports that Bremain is currently 15 points ahead of Brexit. UK CPI at 09:30 am will also provide direction for Sterling today

USD
The US dollar managed to gain ground late in the week after Retail sales came in at +1.3.% and much better than the expected -0.3% with Consumer sentiment jumping to 95.8 and nicely above last month’s 89.0. Over the past two years Q1 GDP has been slow (-0.9% 2014 +0.6% 2015 +0.5% 2016) for the US so if the US economy picks up as it has since then we could get more talk of a US rate hike in June. US CPI is released tomorrow and the FOMC minutes on Wednesday will be inspected for signs of the elusive June interest rate hike. At 10 am the BOC will release their quarterly review on the Canadian economy. I would expect that with the fall in oil prices that their outlook may not be too appealing, but we will see.

Euro
Traded slowly for the week and finally sunk lower after better than expected US retail sales on Friday, which helped produce some European Equity market strength. Europe will start slowly this week with holidays abounding, but we have the Bundesbank monthly report on Tuesday and Final CPI YoY on Wednesday. G7 meetings Thursday and Friday will give headline writers some work to do.

USD
The Dollar climbs higher against the majors as investors await US employment numbers, bond auctions as well as to hear some insight for the next Fed rate hike from FOMC member Rosengren and George. The USD did dip against CAD as oil prices continue to rise however with the amount of US news and lack of Canadian news we could see the dollar go up as Goldman Sacs suggested yesterday.

Euro
European stock markets fell back after Tuesday’s rises and the Euro gained ground after ECB’s Weidmann commented that the ECB must not keep policy ultra-loose for too long. It was also reported that Germany had rejected US efforts to continue the TTIP trade deal (which is hardly surprising if the recent leaks on the terms are to be believed). It is noteworthy that over 60% of German’s have turned against their Chancellor Merkel because of her open door policy to migrants.

GBP
Moves were dominated by expectations of today’s inflation report which meant that although the UK Manufacturing and Industrial production data was disappointing, with UK factory output recording the biggest annual fall since 2013, GBPUSD only dipped lower before pulling back. Chancellor Osborne testified to Parliament on the EU referendum in the afternoon and rolled out the usual doom and gloom stories for a “Brexit” which again had little effect. JP Morgan yesterday calculated that the referendum has knocked some 0.5% - 1.0% off UK GDP so far (a similar amount to the effect of the 9/11 attacks in the US) so the market will watch the MPC vote at lunchtime today to see if there is any change from last month’s 9-0 vote to keep the base rate at 0.5% in response to this weakening in the economy. BOE Governor Carney will enlighten us with the Bank’s view on inflation and the EU referendum so this should give Sterling impetus to move.

 

USD
The US dollar is slipping against many of the majors as investors take their profits from its recent gains. However, the USD is strengthening against the Japan Yen as Finance Minister Aso commented that Japan had room to intervene in the USD/JPY market. Whether they will physically intervene in the markets when they host the G7 meeting later this month, is open to debate, but Aso’s comments certainly moved the market.
Out this morning for the US, we have Oil Inventories, 10 Year Bond Auction, and the Federal Budget Balance. We could easily see a 200 point swing in either direction depending on the outcome.

CAD
The Loonie continues to battle the greenback trying to break the 1.30 mark and stay above. As investors continue to take profits from recent US dollar gains, it will depend on if the US economic numbers can bring about another wave of investing. With that in mind this week particularly tomorrow and Friday we have a slew of US economic data and not much on the Canadian front. The numbers will dictate whether or not we can continue to trade under the 1.30 mark.

GBP
The UK trade deficit was not as bad as expected only being £3.8 billion and less than the expected £4.2 billion. GBPUSD stayed in recent ranges with GBPEUR being unable to benefit from lower than expected German industrial production. The latest British Chamber of Commerce Brexit poll had “Bremain” on 54% and “Brexit” on 37% which was a narrowing of views from the last poll which had 60% and 30% respectively. In case anyone was thinking that the UK can vote “Brexit” and get a good trade deal with the EU read on;

LONDON (Reuters) - Nearly half of voters in eight big European Union countries want to be able to vote on whether to remain members of the bloc, just as Britons will in a referendum next month, according to an opinion poll published on Monday. Forty-five percent of more than 6,000 people surveyed in Belgium, France, Germany, Hungary, Italy, Poland, Spain and Sweden said they wanted their own vote, and a third would opt to leave the EU if given the chance, poll firm Ipsos-MORI said.

GBP

Despite the Halifax house Price index falling 0.8% MoM GBPUSD actually strengthened on order flow in the market, highlighting the current lack of liquidity. There had been speculation of a UK rate cut in the press but this had little effect as well. The latest YouGov “Brexit” poll showed 42% “Bremain” and 40% “Brexit” with the betting 1/3 for stay and 13/5 leave. The betting odds haven’t moved much, if anything showing more bets on the UK staying in the EU recently.

Euro

Greece managed to approve pension and tax reforms which are an important step to releasing the latest tranche of funds from the Creditors. The Euro was quite range bound and mainly pushed around by other currency pairs. EURJPY pushed higher as did EURCAD but EURUSD was soft. With no top tier economic data due for release today we may get similar trading today. Swiss unemployment came in at 3.5% and as expected whilst German industrial production fell 1.3% and much lower than the expected 0.2% decline.

USD

Although Friday’s headline jobs data was disappointing some analysts are pointing to average earnings being 2.5% and Personal Consumption Expenditure (PCE) at +1.6% in March. The Fed’s PCE target is 2.0% so it is probably early to call for Fed rate hike for June for this analyst however others are calling for the June meeting to still be “live” and as such the USD appears to have strengthened.

USD

The USD staged a recovery from recent weakness although the market is starting to consider the reality of “President Trump” which isn’t helping the US Equity markets.

Last Fridays disappointing headline number for Nonfarm payrolls of 160k and much lower than the expected 203K only saw temporary weakness for the USD, but the market has now discounted a US rate hike in June. Will it be only one rate hike for the Fed this year? Friday is the big data release day for the USD this week with the release of retail sales data and consumer sentiment.

GBP

The central theme for the Pound last week was one of slowdown as the Purchasing managers indexes were all below expectations with manufacturing the worse reading at 49.2 and showing a contraction for the manufacturing industry last month. GBPUSD had been pushing higher and pricing in a “Bremain” result, but the move higher was halted as the focus moved to weak economic data. Thursday is the highlight this week with the BOE Quarterly Inflation report and MPC vote. We expect no change from the BOE, but Governor Carney’s press conference afterwards has already been highlighted as worth watching as he is expected to provide more warnings over the EU referendum as well as possibly cutting the Bank’s growth forecasts for the UK economy. It will be interesting to hear how their view has changed in the face of weak economic data recently.

Euro

Last week the Euro weakened against the USD but still managed to strengthen against the Pound in response to the EU commissions cuts to its inflation and GDP forecasts to 0.2% from 0.5% and to 1.6% from 1.7% respectively. This week Friday is the primary day for European data with German and Eurozone GDP providing direction. In Greece, workers are on a three-day strike as they protest against new tax increases and pension cuts. The Govt. is being accused of failing to “deliver on hefty social promises”. Euro-group meetings are being held today, and the market will watch for any comments on the Greek situation.

USD

The US dollar managed to gain ground against the Yen and Euro with the move being blamed mostly on position movement before the important Non-Farm payrolls release today. The market is poised for a weaker number than last month but is very aware that the recent positive job numbers have not been accompanied by a rise in US consumption and expenditure which of course is needed to push the US economy forward. In this case the market is only pricing in a small 10% chance of a US rate hike in June with a 50% chance of a rate hike at the end of the year. If the jobs data is very strong or very weak we could have a volatile afternoon.

CAD

We continue to test higher for CAD over USD as we teeter around the 1.29 range. We will see it break this morning one way of the other it will come down to Canadian employment numbers and the US unemployment rate which ever has the better than expected number should take lead. Interesting to note however is that the Canadian employment change is expected to be much lower than previous months. Meaning we could see the Canadian dollar to strengthen against the greenback.

Euro

The ECB commented that the economic recovery was to proceed but risks remained to the downside and with the interest rate market indicating slightly higher US rates before the US NFP number today the Euro was under pressure for most of the day. The stock markets were soft overnight and gave the Euro some support but all eyes are on the US figure this afternoon.

USD
The US Dollar index is higher this morning as positive economic data out of the US yesterday helped the Greenback recover after a tough couple of days, the market will now start to focus on the US Employment report due out tomorrow.

CAD
The Canadian Dollar was stronger in overnight trading, off of it worst levels from yesterday. Yesterday the Canadian Dollar weakness that we saw early in the week was extended when the worst Canadian trade deficit in history was reported in March; the report came in at$3.4 Billion, which was $1.4 Billion higher than the markets were expecting. This tells us two things, the US is not buying any of our products and even with the weak Canadian Dollar as low as it was in March we still can’t manufacture anything to export to other countries, the bulk of our exports in the past were resourced based and if that industry sours so does our economy. This does not auger well for the Canadians going forward; I would think it will be hard for the Canadian Dollar to stage any significant rally’s in this environment so I will still favour a move back towards 1.3000 in the coming days.

Nothing on the economic Calendar today so the Loonie will get its direction from equity markets and the oil price, I would think we may trade lower today just to give the market a bit of a rest, we have had a massive move higher this week and a bit of a pullback lower for USD.CAD will get the market ready for tomorrow’s US and Canadian Employment data. Get your orders in early as I think enhanced volatility will return tomorrow and it will be a very busy day.

GBP
In the UK, further weak economic data came in and GBP.USD dropped lower, the data coming out of the UK has been fragile lately so I wonder if that will continue to affect the outcome of the referendum in June.

USD
The US Dollar is marginally stronger this morning as it has reversed its trend from the previous weeks, all it took was a weak economic report out of China to send global investors diving out of the world`s equity markets and back into the safety of US treasuries for the Greenback to start to appreciate. With markets almost exclusively focused on what the US Federal Reserve is going to do with interest rates in June, this latest development will make for an interesting meeting. At their last meeting the Fed removed the statement where that said they were concerned with global growth, do they now put that comment back in their June report and hold off increasing interest rates it is going to be very interesting few weeks.

CAD
The party that was the strong Canadian Dollar was raided by the police yesterday and came to a crashing end, USD.CAD jumped over 200 points which in a single day is a massive move and does not happen all that often. The report out of China, a surprise interest rate cut in Australia and a significant drop in the oil price have all conspired to hit the Loonie. The market did calm down a bit overnight with USD.CAD only jumping a small amount from the Toronto close and given the weakness in both the Euro and Sterling to the US dollar the Loonie did not lose a lot of ground to those currencies, overall not a bad overnight session after a brutal day yesterday.

We should have another busy day today, we get a slew of US secondary economic data and also some Canadian Trade data but with the Stock Market already pointing down 100 points on the North American opening I look for there to be more pressure on USD.CAD to go higher today.

Euro
In FX news both the Euro and Sterling are lower to the US Dollar. In the UK, some construction data came in below expectation and in the Euro-Zone the purchasing managers index came in slightly weaker than expected so no real encouraging news coming out of Europe at the moment.

USD
The US Dollar index hit new 16-month lows overnight as weak manufacturing data out of China, and a surprise interest rate cut in Australia sent investors running for cover, stocks, bonds, and commodities were all lower overnight. The overnight session was one of the most active that we have seen in weeks.

CAD
The Central Bank of Australia cited weaker than expected inflation data as their reason for cutting interest rates; this may be something that we watch for in Canada as well. If our inflation data starts to come in lower than the Bank of Canada wants we may see the same thing happen here, such a move by the BOC would take the Canadian Dollar much lower.

EUR
EURO.USD hit its highest level since last summer as the weak US Dollar continues to give strength to the Euro, not sure I would pile into the Euro if I lost confidence in the US Dollar but some of this seems to be happening at the moment. I think it will take a US interest rate hike to start bringing back some of the shine to the Greenback.

GBP
The Pound was stronger for a good part of the overnight session, but once a UK manufacturing report showed manufacturing activity contracted for the first time in three years that strength disappeared quickly and GBP.USD fell quite a bit.

CNY
Concerns about the Chinese economy continue to weigh on the commodity currencies; the Canadian Dollar was having an excellent night as USD.CAD moved lower in early trading but once the Chinese data and Australian interest rate cut news hit the market USD.CAD soared back higher by 100 points and looks set to continue higher. The Loonie also set new recent lows against the Euro and Sterling as both EURO.CAD and GBP.CAD have moved higher to levels last seen a couple of weeks ago. Some of the overnight weakness in the Canadian Dollar can be attributed to the drop in commodity prices in particular with the oil price falling near $44 a barrel, if this continues into the North American session then I think we will see USD.CAD target 1.2600 today.

USD
The US Dollar index is marginally weaker this morning in a quiet overnight trading session; the UK markets are closed for the Spring Bank holiday, so trading volumes are very light to start the new month. The US Dollar continues to trade with a weak bias as uncertainty over the Federal Reserve interest rate policy and a slightly weaker than expected GDP report on Friday weighed on the Greenback.

CAD
The Canadian Dollar is still showing signs of strength and is holding onto its recent strength against the US Dollar. Overnight we saw a big jump in the Gold and Silver price as the Oil price continues to trade at the top end of its recent range near $46 a barrel. There is no reason to expect a significant drop in the value of the Loonie at the moment; it is still garnering support from a strong commodity market. It has lost a tiny bit of strength to the Euro and Sterling but nothing significant.

We have a busy week on the economic calendar to start the new trading month, and we get lots of US and Canadian Secondary data throughout the week which all leads up to both the US and Canadian April Employment reports on Friday. Up today we get US manufacturing data and with London closed we may see a little-enhanced volatility. Overall I still look for USD.CAD to test lower but at some point in the medium-term we will see a pullback higher so US Dollar buyers should be looking at locking in part of their exposure at these levels as a precaution. For what it is worth all five Canadian banks are calling for a USD.CAD rate above 1.3000 before the end of the 2nd quarter.

USD
The US Dollar index is lower to start the day and is at the lowest level since the last summer; the currency markets continue to digest the news this week from Central banks in Japan and the US and trade the Greenback weaker.

Up today, we have a slew of US secondary data including Personal Income and Expenditures and Consumer Sentiment, all statistics that the Fed will be looking at before making their next decision on interest rates. That being said the Canadian Dollar market today will focus on the GDP report for February where we are expecting the economy to show signs of slowing down. We are expecting a decrease of 0.2% in the economy in the month of February (last 0.6%) and an annualized growth rate of 1.5%, since BOC Governor Poloz has prepared the market for a poor number I am not sure that this February report will have a big effect on the exchange rate if the report comes in as expected. That being said, if it comes in much worse than expected then we will see USD.CAD make a big jump higher.

CAD
The Canadian Dollar continues to push forward as USD.CAD fell to new 7-month lows; the Loonie continues to tread water against both the Euro and Sterling, one day up and one day down but at least it is holding onto its recent strength against those currencies. In addition to the overall weakness in the US Dollar at the moment, the Loonie is still getting benefit from the oil price as it traded as high as $46.50 a barrel last night, for now, I would think we will see the Loonie continue on this amazing run.

EUR
In overnight news the Euro continues to push higher, Euro-Zone GDP in the first quarter rose 0.6% (1.6% on an annualized basis) which was slightly better than the market expectation, but when you factor in inflation, there is very little growth in the general economy.

Additional NEWS:

Just a quick FX tidbit for you, the Bank for International Settlements (BIS) in Switzerland acts as a Central Bank for the world`s Central Banks and every three years they conduct a global survey of FX daily trading volumes. Each Central Bank mandates its commercial banks to record all their daily transactions in the month of April and provide those trading statistics to their Central Bank; they are then forwarded on to the BIS, who tabulates them for the global market. The last survey was in April of 2013, and it was discovered that daily global turnover in the US dollar terms was $5.3 Trillion dollars a day, Canadian dollar trading was less than 10% of that total. The 2016 survey concludes today, and it will take about 6 months for the BIS to publish the results, every survey that has been done to date has shown an increase in daily FX volumes but I will be very interested to see if daily FX turnover has decreased over the last three years due to government regulatory intervention in financial markets to try and curb speculation, a factor which may be contributing to the excessive volatility we have seen over the last year.

USD

The US Dollar index is marginally weaker this morning in a quiet overnight session, both EURO.USD and GBP.USD moved a little higher as currency traders start to square up their positions ahead of the US Federal Reserve announcement on interest rates tomorrow. The market is also waiting to see if the Bank of Japan will announce any further stimulus measures this week, that economy has been plagued by weak inflation and a strengthening Yen, so the market is looking for the Central Bank to take some action.

CAD

The Canadian Dollar had a strong overnight session with USD.CAD dropping some 50 points at one point, the exchange rate did recover a little this morning, but we do start the day with a slightly stronger Loonie. The Loonie did get a bit of an overnight boost from a jump in the oil price but for the most part, we are still in that $42-$44 range, and we will need to see a move outside of that range before we will get a significant oil-related move in USD.CAD.

Up today we could have some additional volatility as we have a slew of secondary US data including Consumer Confidence and Durable Goods, once we get through these numbers, we should have a quiet afternoon as we get set up for tomorrow.

GBP

Sterling continues on a bit of a run as of late, GBP.USD traded to 1.4550 which is the highest level since January of this year, the Pound continues to benefit from the Obama comments on the weekend, and as we get closer to the Brexit vote, the polls will start to play an important role. If the vote should come in favour of leaving the EU to look for massive flows to move into the US Dollar, you have seen me write this before but financial markets do not like uncertainty, and a “leave” vote will move investor money to the safe haven of US Treasuries until things calm down.

USD

The US Dollar Index is marginally lower this morning in a quiet overnight trading session; the Asian markets saw reduced volume as Australia, New Zealand was closed for the ANZAC national holiday. The biggest mover overnight was Sterling as President Obama weighed in on the UK referendum threatening that all trade talk with the US and the UK would move to the back of the line if the vote to leave the EU wins the day. I am sure both Cameron and Obama had scripted these comments well ahead of time, GBP.USD which had closed on Friday at 1.4400 now trades near 1.4500 so a good start to the week for the Pound.

The Oil price was relatively stable overnight as it is still in the $42-$44 range, I think it will need to break out of this range before it will start affecting the Canadian Dollar again, we have lots going this week so if the oil price does not move that much then the correlation between the Canadian Dollar and the oil price should be reduced.

CAD

The Canadian Dollar is a bit weaker this morning but the Loonie still shows lots of resiliency as it is holding onto recent bouts of strength and quite frankly it does not look like there will be a quick turnaround anytime soon, it will take some very negative Canadian economic data or a surprise interest rate hike from the US Federal Reserve to reverse the short-term trend. The Loonie did lose a little steam against both the Euro and Sterling last night as both of those currencies moved higher.

We have a very busy week on the economic calendar this week highlighted by the US Federal Reserve interest rate announcement on Wednesday, and both the Canadian and US GDP reports later in the week. The US Fed will be key to the volatility while I do not think they will increase interest rates their forward-looking statements will be key to the market. Ahead of the announcement USD.CAD should remain range bound giving you plenty of time to look at an appropriate hedging strategy to protect yourself.

USD

The US Dollar Index is marginally stronger this morning primarily on weaker than expected manufacturing data coming out of Europe. Yesterday saw ECB Governor backtrack a bit on his comments from last month as he stated the ECB is ready to use all necessary means including further interest rate cuts to ensure inflation starts to move higher in Europe and the economy returns to normal growth patterns. As you would expect EURO.USD is trading weaker on the manufacturing reports and Draghi’s comments.

CAD

USD.CAD has been moving higher off of it lowest levels; the oil price has stabilized between $42 and $44 for the moment, so the Loonie has started to give back a little bit of its strength. The Loonie did pick up a little strength against Euro but with the surprising strength in Sterling this week it has lost a little bit to the Pound. Nothing has changed for the Loonie, over the short-term it should track the price of oil and the overall trend of the US Dollar, I look for it to range trade again over the next few sessions

Up today we get the Canadian Retail Sales report for February unless it surprises I do not think it will have much effect on the value of the Loonie, look for USD.CAD to test 1.2750 at some point today.

JPY

If you have been watching the Japanese Yen, it has been losing some ground over the past few sessions. There is a growing expectation that next week the Bank of Japan may increase their stimulus package to try and grow the economy, it seems that the whole world is looking at negative interest rates these days which to my mind is not having a whole lot of success.

USD

The US Dollar is unchanged from the Toronto close last night as the markets get ready for this morning’s announcement from the European Central Bank on interest rates. After last month’s aggressive cutting by the ECB and further comments from ECB Governor Draghi that further rate cuts would not be necessary, the market is not expecting the ECB to announce any changes this morning. Of interest will be the new statement from Draghi and if he sticks to his previous comments that the Euro-Zone economy will not need further stimulus.

CAD

USD.CAD is right where we left it last night after it had another great day and reached new levels last seen in the summer of 2105. I had sent out the currency alert just to let US Dollar buyers know that the currency pair was tracking the oil price. As I was watching the oil chart, for every tick up in the price of oil, you could see USD.CAD drop by almost the same amount. I am not sure why the oil price is suddenly jumping so much as nothing fundamentally has changed in the oil world if the oil price starts to drop again look for USD.CAD to move back higher. The Loonie did also pick up some strength the Euro and Sterling but is steaming ahead against the Greenback; it is hard to say if this will continue but the Loonie is certainly on a roll.

GBP

The busiest currency last night was Sterling, which is higher from its overnight lows against the Greenback. Initially, the Pound fell quite significantly as the Retail Sales report for March came in below expectation but after the quick drop GBP.USD jumped sharply and is at a higher level than it was before the announcement. EURO.USD traded in a narrow overnight range as would be expected ahead of the ECB announcement.

In addition to the ECB announcement shortly we also get US Leading indicators, and the Philadelphia Fed index reports so we can again expect to see enhanced volatility today. Make sure you have it working for you by getting your orders in early today.

USD

The US Dollar Index is unchanged this morning, both EURO.USD and GBP.USD were unchanged as the markets get ready for the ECB announcement on interest rates tomorrow. The oil worker`s strike in Kuwait that had been pushing oil prices higher has come to an end, so the price of a barrel started to fall back in early overnight trading pushing both the dollar and stocks lower.

CAD

There is no denying the strength of the Canadian Dollar, USD.CAD hit levels last seen in July of 2105 yesterday, the distant calls from all the economists that USD.CAD would trade at 1.5000 have now seemed to have faded into history. The Loonie did give back a little bit of yesterday`s strength in the overnight market but has again started to trade stronger this morning, given the volatility in the oil market at the moment this volatility in USD.CAD looks like it will continue for a while.

We get some trade data out of Canada today unless it is really off the mark I do not expect it to have a dramatic effect on the exchange rate, which being said it is worth watching to see how the recovering Canadian Dollar is affecting our export market. For the most part, I will keep an eye on the oil price as that seems to be moving the Loonie at the moment.

GBP

The British Pound traded a little lower for a while last night as UK Employment data showed the number of Britain`s looking for work rose more than expected in March, with the June Brexit vote approaching fast any negative UK data will surely keep the Pound under pressure.

USD

The US Dollar Index is marginally lower this morning as the currency markets digest the news that the OPEC meeting in Qatar did not produce any consensus on oil production. The big movers overnight were, of course, the Commodity Currencies. The Aussie, Kiwi, and Canadian Dollars were all significantly lower overnight, each of these currencies dropped in reaction to the big drop in the oil price.

The price of a barrel of oil had been trading above $41 a barrel on Friday, oil traders were awaiting confirmation of the rumours early in the week where Russian and Saudi Arabia had agreed oil production quotas but instead they were met with disappointment after Iran refused to join in (on the instance of Saudi Arabia). Oil dropped to trade below $39 a barrel and took the commodity currencies with it.

CAD

On the reports out of Qatar the first recorded price for USD.CAD was 140 points higher that where we closed on Friday, but the Loonie was able to stage a bit of a rally last night and recovered some of those losses. With little activity out of the Euro and Sterling the Loonie also lost considerable strength to both of those currencies so not a very good night for the Loonie. Given that we have come so far so fast I would not be surprised if USD.CAD does go lower today; this move was solely in reaction to the oil price, and it should stabilize today giving the Loonie a chance to recover.

Up this week on the North American economic calendar the biggest piece of news is the Canadian Retail Sales and CPI reports due out on Friday. Ahead of that, we do get the European Central Bank reporting on interest rates on Thursday; it will be interesting to see the ECB goes further into negative interest rates and adds, even more, stimulus to the economy.

USD

The US Dollar is, for the most part, unchanged this morning; it did recover what it lost yesterday after the US CPI report for March showed inflation was not climbing as much as the Fed had hoped. Generally, Central Banks cannot increase interest rates when inflation is dropping, the Fed is looking for a steady 2% inflation rate and at the moment it is a little less than that in the US.

In overnight news, the Chinese economy reported an annualized growth rate in the first quarter of 6.7%, while not as strong as other quarters I think the number did reassure investors that the Chinese economy was not sliding off a cliff.

CAD

USD.CAD dropped about 50 points on the inflation data yesterday but gave that back and a little more in the overnight session, the Loonie also lost against the Euro and a little more significantly against Sterling as the Pound was also higher against the US Dollar last night. The Loonie has been on quite a run over the past couple of months, so the big question is has the Loonie run out of steam or is their further strength to come. In order for the Loonie to keep going we will need more positive data out of Canada and the US Federal Reserve not to hint later this month about increasing rates sooner than later. I do get the sense now that USD.CAD may range trade with no significant move in either direction for a while.

Up today on the economic calendar we get lots of Secondary US data including Industrial Production and Capacity Utilization, we could have a busy morning if any of these numbers surprise. Also, this weekend we get the G-20 meeting in Washington and the OPEC meeting it Qatar so we could see a very different rate to start the day on Monday, make sure you get your orders in early.

USD

The US dollar surpasses its largest one-day gain against the majors in over a month as concerns about global growth are eased. Although yesterday’s US core retail and PPI numbers were much lower than expected (leading to the dip in USD over CAD), we see that the US is stocking up on cheap oil with inventory levels reaching 6.6M over an expected 0.9M. This is either a sign of US slowdown or a signal that oil prices are on the rise, and there is an effort to reduce future costs by stockpiling cheap oil. At the same time, this push to purchase oil helps the Canadian economy as our major export and largest oil trading partner just happens to be the US. Today we have US unemployment claims expected to be around 260K or 270Kin addition to core CPI. With the summer around the corner, I would expect the US numbers for unemployment to be much lower leading to a bump in the USD.

CAD

All eyes were on the BOC over its key interest rate decision and to maintain course at 0.5% yesterday lead to a bit of strength for the Loonie. Yesterday we also crossed over a new low for the greenback over the loonie reaching 1.2800 last seen in October. This could signal that greenback has further to fall against the Loonie. No major news out for Canada today, however, as the IMF heads into its spring meeting which is set to speak specifically on currency rates expect to see some volatility and place those rate orders specifically over the weekend.

USD

The US Dollar Index is marginally stronger this morning as overnight weakness in the Euro and Yen has given the Greenback a bit of strength to start our day. There was nothing on the economic calendar last night to account for the US Dollar strengthening (with the exception of some positive secondary data out of China), so I think the move was nothing more than profit taking from speculators that had been short the US Dollar over the past few weeks.

CAD

The Canadian Dollar and all commodity currencies had a very strong day yesterday as there was a published report that Russia and Saudi Arabia had agreed on production levels for oil. This morning there are reports that the Saudi Oil Minister has ruled out production cuts ahead of the OPEC meeting this weekend, the Oil price which had jumped over $42 a barrel fell back this morning taking the Canadian Dollar with it.. USD.CAD fell yesterday to trade below 1.2800, but it has since given back some of those gains this morning as there is still lots of uncertainty if the oil producing countries will agree on production cuts at their meeting this weekend.

Canadian Dollar trading today will, of course, be dominated by the Bank of Canada announcement on interest news. Since the last time the Bank got together to discuss interest rates the Canadian economic picture appears to have improved so I am expecting the Bank statement should be upbeat, there is little chance of any interest rate changes, but hopefully, Poloz will have something positive to say. As always I will send out a currency alert shortly after the announcement.

In addition to the BOC, we also have US Retail Sales out for March, market watchers will be looking for a positive number which should help the Fed with their decision on when next to increase US interest rates. Lots going on this week so make sure you have your orders in early, we also get a G-20 meeting along with the OPEC meeting on the weekend so the USD.CAD exchange rate could be very different this time next week.

USD

The US Dollar Index is marginally weaker this morning. There have been no comments from the Fed on yesterday’s meeting so far, the currency market is still taking the US dollar lower on the premises that there will be no interest rate hikes anytime in the near future. We will see if there are any shifts in tone from Fed speakers over the next few weeks.

CAD

The Canadian Dollar continues to benefit from the strong employment report on Friday, USD.CAD fell about 50 pips last night and that is after the Loonie had a strong showing yesterday afternoon. The Loonie is also picking up some gains against the Euro and Sterling so it is on a bit of a roll at the moment ahead of the Bank of Canada interest rate announcement tomorrow. The Oil price is back above $40 a barrel so I am sure the Loonie is also getting a bit of benefit from that jump as well.

Nothing major on the economic calendar today so I would not be surprised if we see a bit of a pullback for USD.CAD ahead of tomorrow BOC announcement a traders square up their open positions.

USD

The US Dollar Index is for the most part unchanged to start the new trading week. The currency most in focus at the moment is the Japanese Yen where the Greenback as hit a 17-month low against the Yen. In overnight trading USD.YEN fell to trade at 107.70 on the back of comments from the Japanese Government that they are concerned with the effect the strong Yen will have on Japan’s economic recovery. A strong domestic currency hurt’s export competitiveness and that is something the Japanese Government does not want to see.

CAD

The Canadian Dollar had a quiet overnight session and USD.CAD is right where we left it on Friday. The Loonie has been able to hold onto its strong showing after the better than expected employment report on Friday; that is the 2nd week in a row that the Canadian economy has reported some excellent news, perhaps we are turning the corner of what has bene a lackluster economic performance over the past year or so. If in fact as the Bank of Canada is hoping we are moving away from being a resource based economy then the weak Canadian Dollar will have played a big part in that move. Even though the Loonie had a great day on Friday we are still in the same range we have been for the last few weeks, I will need to see a good break below 1.2900 to confirm more Canadian Dollar strength, at the moment the move lower has stalled around the 1.3000 level.

Up this week trading will be highlighted by the Bank of Canada announcement on interest rates on Wednesday, US Retail Sales tomorrow and US CPI on Thursday. We should have another busy week so make sure you get your orders in early; I would anticipate lots of volatility.

No economic news out today but remember the US Federal Reserve will have their extraordinary meeting to discuss interest rates.  I do not think they will make any announcements today, but if there is a change in their tone, I think you will start to see committee members making more speeches talking up higher interest rates ahead of the regular meeting on April 27th. If that starts to happen look for USD.CAD to jump higher over the coming days.

USD

The US Dollar index is unchanged this morning in quiet overseas markets. In overnight new the UK economy reported a drop in manufacturing production, a number that will not help Sterling in the short-term, in fact, the Pound had been trading a bit stronger overnight and then it fell back as the poor economic data came out. In Europe, more ECB officials were talking yesterday that the ECB stands ready to act if the economy warrants further economic action. It sounds to me like they are getting worried and are laying the groundwork for more stimulus and further interest rate cuts.

CAD

The Canadian Dollar fared quite well in the overnight session against the Greenback, USD.CAD is down almost 100 pips from its intra-day high of yesterday; the oil price jumped a bit overnight so the Loonie may be getting a bit of a benefit from that move. The Loonie also picked up some gains against the Euro and Sterling as both EURO.CAD and GBP.CAD are at weekly lows.

Canadian Dollar trading today will be dominated by the March Jobs report, market watchers will be looking to see if the Canadian economy can maintain any momentum from last Friday’s strong Canadian GDP report. The market is expecting 10K new jobs to have been created (last month we lost 2.3K) and a slight dip in the unemployment rate. Either way, it goes we could have a significant swing in the USD exchange rate, s strong report takes USD.CAD lower and a weak one will push it a lot higher.

USD

The US Dollar is marginally stronger this morning after trading weaker in the early overnight session. Yesterday’s release of the Fed minutes confirmed that there is consensus to take a conservative approach to interest rate hikes and supported the view that there is a very little likelihood of a US interest rate hike before June. The major concern for the Fed seems to be the slowing Global economy and the effect that will have on the US economy.

Euro

The Euro which had been trading stronger during the early overnight session moved lower as ECB officials said the Central Bank stands ready to do more to the economy if it was hit by fresh shocks. Did the ECB Governor not say just last month that the ECB were not going to do any more rate cuts or add stimulus? Currency markets get very nervous when we start to get contradicting signals from central bankers!

In the UK Prime Minister Cameron is under pressure at the moment following the discovery in the Panama Papers that his late father had an offshore account. While he denies that he has received any benefit from the account, we may see a swing in support away from the Prime Minister and move towards the camp that wants to leave the EU. The next poll results will be worth watching and will most likely affect Sterling.

CAD

The Canadian Dollar continues to give background to its Southern counterpart as we can now say that the rally the Loonie experienced over the past couple of weeks has run its course, we are now some 400 points off of the recent lows for USD.CAD and the currency pair does look like it wants to break higher. The Loonie is also marginally weaker against the Euro and Pound, and it does look like EURO.CAD will break above the psychological barrier of 1.5000 soon.

Nothing of note on the Economic calendar today, the Canadian markets will start to get lined up for tomorrow’s Canadian employment report. For today, I look for USD.CAD to move a little higher and then trade in a narrow range for the afternoon.

USD

The US Dollar is marginally stronger this morning as the currency markets await the release of last month’s Federal Reserve meeting minutes. The Euro weakness was limited by a stronger than expected Industrial output report, while the output fell throughout the region it did not fall as much as was expected by economists. GBP.USD was the biggest mover overnight as it dropped over 100 points to trade at 1.4040. I can’t find anything specific as to why Sterling dropped so much, I did read where one economist is calling for a further 4% drop in the value of the Pound ahead of the EU vote on June 23rd. The Loonie was also able to take advantage of the Sterling weakness as GBP.CAD is down almost 75 points.

The Oil price opens the morning at $37, up quite a bit from yesterday’s opening. The oil price seems to have settled in between $38 and $33 for the last little while, I think we would need to see a big break outside this range for the oil price to have a big influence on the Loonie if the short-term.

CAD

The Loonie had a quiet night against the Greenback with USD.CAD trading in a fairly tight overnight trading range, it looks to be settling into its new trading range for the moment. One of the Canadian banks has published its April strategy report where they are calling for a rate of 1.4000 in three months, I am not sure we will see 1.4000 but certainly I hold the view that we will see some more Canadian Dollar weakness over the next few months.

As mentioned we get the release of the FOMC meeting minutes this afternoon, market pundits will be looking to see if the rest of the committee shares the view of Janet Yellen that they will remain conservative when it comes to increasing US Interest rates. If there was a significant group of committee members that voted in favor of a rate hike then look for the US Dollar to jump much higher, if the vote was as expected and most were in favor of waiting then look for the US Dollar to pull back a little.

USD

The US Dollar is marginally stronger this morning as it continues to stabilize following a long period of weakness. Nothing out of the ordinary last night, both the UK and Euro-Zone reported some poorer than expected secondary economic data so that that did not help either currency as both were a bit weaker to the Greenback.

CAD

The Canadian Dollar took it on the chin last night as USD.CAD jumped almost 125 points from the low of yesterday; the Loonie was hit by the weaker oil price and the overall strength in the US Dollar. The Loonie also lost some ground to both the Euro and Sterling as weakness in those currencies was not as pronounced against the US Dollar. It looks for the moment that the Canadian Dollar is trading on its back foot, it may take a great Employment report on Friday to reverse that trend, and the strong Canadian GDP report from last Friday seems to have lost its lustre.

Up today, we get trade data out of both the US and Canada, so we could easily see some enhanced volatility, especially if the Canadian data disappoints. Yesterday I mentioned that we have the Fed decision on interest rates tomorrow but I was getting ahead of myself, tomorrow we get the FOMC minutes from their last meeting, the actual April decision on interest rates will be on the 27th of the month.

USD
The US Dollar is marginally stronger against the majors this morning as the Greenback continues to recover after the strong Employment report on Friday. Overnight in Europe the Euro fell slightly to trade at 1.1360, this in spite of the Euro-Zone employment rate falling to 10.3% from 10.4%.
I do not think the creation of 215K new jobs in the US last month (expectation of 205K) was enough to get the Fed to change their minds about increasing interest rates in the short-term, so I do not think this report is a game changer for the US economy. The effect on the US Dollar should wear off soon, and then market watchers will go back to see what the Fed will do next.
Oil is trading at $36.80 and also traded in a narrow band to start the week.

CAD
USD.CAD did move higher in the early overnight session but recovered a little when London started up. The Loonie continues to lose ground to the Euro and Sterling as the Loonie is weakening faster against the US Dollar they those two particular currencies are. I think we will see more of the same this week where the Loonie will trade with a weak bias as it gradually starts to give back some of the ground that it made up last week.
This week’s Calendar of Economic Releases is highlighted by the US Federal Reserve meeting on interest rates on Wednesday and the Canadian Employment report on Friday. Ahead of those all-important releases, we do get some other significant data, US Factory orders today and both US and Canadian Trade data tomorrow. Ahead of the Fed on Wednesday I look for USD.CAD to continue to range trade within recent ranges, I will comment more on the Fed decision later in the week.

USD
The US Dollar is again weaker this morning as the currency market continues to react to the Yellen comments from earlier in the week by punishing the Greenback. This move in March will be the largest monthly drop in the value of the US Dollar since April of 2015 and its largest decline over a quarter since 2011, and at the moment, there are no indications that this decline will stop anytime soon.

The Dollar fell some 0.25% against the Euro last night as inflation data out of Europe came in as expected, in the UK despite a slightly better than expected UK GDP report the Pound did not fare as well to the Dollar as the Euro did. GBP.USD was only up about 20 pips, the uncertainty of the outcome of the June 23rd referendum on EU membership continues to weigh on Sterling and should prevent it from any significant strength in the coming weeks.

CAD
The Canadian Dollar continues to benefit from the weakness in the US Dollar, USD.CAD has had a significant drop during the overnight session and is approaching levels last seen in October of last year. Once again however the gains for the Loonie against the US Dollar are being offset by similar gains for the Euro and Pound so at the moment EURO.CAD and GBP.CAD are not rallying all that much.

Up today, we get the Canadian GDP report for January where we are expecting a month-over-month increase of 0.2% and a year-over-year growth rate of 1.1%, numbers that will do nothing to get the economists excited about the Canadian economy. We also get some data out of the US (Chicago PMI) but, for the most part, the focus will be on the Canadian GDP report, and then markets will get ready for the US Employment report tomorrow

USD
The US Dollar is much weaker this morning as yesterday US Federal Reserve Janet Yellen downplayed the expectation of any immediate interest rate hike in the US. In her speech, she cited global risks to the US economy, the uncertainty of economic developments in China and lower oil prices as reasons that the Fed should continue to take a cautious approach to interest rates. AS you would expect the US Dollar was sold off on this speech with EURO.USD rising 80 pips and USD.CAD fell 50 pips. The Dollar has continued to drop further in overnight activity.

The Oil price opens around $38.50, after trading higher in the overnight session the oil price has given back some strength early this morning.

CAD
As mention above the Loonie continued to pick up some strength against the US Dollar last night and we have broken below the low end of the recent range, if the Greenback remains under pressure from the Yellen comments there is every reason to expect that USD.CAD could again retrace back to our lows near 1.2900 in the next day or two. The Loonie has not made any significant gains against the Euro or Sterling as similar strength in those currencies against the US Dollar have offset the Canadian Dollar strength.

Up today we get the ADP Private Employment report out of the US, it is not as important as the US Department of Labor report on Friday but it may give us a bit of direction today as we lead into Friday’s report. For today, I will see if the US Dollar still continues to give back some strength.

USD

The US Dollar has held steady in quiet overnight trading sessions, it is being supported by recent Fed official comments about a possible interest rate hike in April and nervous European markets following the Brussels terrorist attack. Sterling remains weak as it traded to a 15-month low against the Euro, it is three months today that Britain’s will go to the polls to determine their future in the European Union. The current poll shows that 43% are in favour of leaving the EU (the “Brexit”, 41% in favour of staying and 16% undecided. The Brits love to bet on everything and Book Makers are putting the chance of a Brexit vote at 36%, interestingly that has risen since Monday’s attack, the odds before the attack were at 33%.

CAD

The Canadian Dollar had a tough day yesterday as I think the government budget and weak commodity markets combined to hit the Loonie very hard, at one point USD.CAD had jumped 150 points and it looks like it wants to trade higher again today. The Oil price is down below $39 a barrel and is most likely being affected by the latest terrorist attack as well. With the overnight weakness in the Euro and Sterling the Loonie has held its ground against those currencies as is actually picking up a little strength against Sterling.

Up today we just have the US Durable Good report so I am not expecting a lot of volatility, the currency market will set up for tomorrow’s release of the US GDP report which could pave the way for a rate hike in April. Just a reminder that the a lot of the world will be closed tomorrow including our office but the US market will be open and they are releasing one of their most important economic reports as well. Given the lack of liquidity that will be in the market, we could see greatly enhanced volatility in the market so make sure that you cover off everything you need to today and leave your orders early today to take advantage of any possibility of movement. Our offices in New York and Los Angeles will be watching all orders for us.

USD
The US Dollar is marginally stronger this morning in narrow range trading overnight. The Greenback did pick up some steam late in the day as the head of the Philadelphia Federal Reserve and a voting member on the Fed’s committee said that US interest rates should be increased in April if the US economy continues to show signs of recovery. This statement follows up other officials making statement calling for a rate hike in April and one official saying that there should be two more rate hikes this year. Clearly support is being laid for the next interest rate hikes in the US.

CAD
The Canadian Dollar is marginally weaker as USD.CAD moved a little higher after the release of the budget, I am not sure if that is a reaction to the budget or more due to the overall strength in the US Dollar, the Loonie did pick up a little strength against the Euro and Sterling, weakness in those two currencies continues to benefit the Loonie. It will take a while for this new spending to filter into the economy so I would say over the immediate short-term it will have limited impact on the value of the Canadian Dollar but over the medium and long-term is should help to stimulate the economy and the Loonie may see some strength as a result. I will be interested to see what the reaction from the Bank of Canada is and will they feel another interest rate cut is necessary for the economy?

USD

The US Dollar is stronger this morning as investors moved into safe haven currencies after the latest terrorist attack in Europe. On the report of the Brussels attack the Euro started to trade weaker with EUR.USD falling .30%, Sterling also fell as GBP.USD was down .60%. This drop in the European currencies due to the attack overshadowed a series of economic releases that showed UK inflation was ticking slightly higher and EU Manufacturing and Business climate data showed an improving economic picture in the common market. An ever increasing terrorist war in Europe will undermine any recovery in Europe and keep the Euro trading with a weak bias for some time to come.

CAD
The Canadian Dollar is for the most part unchanged this morning against the US Dollar but it did have a very brief spell of weakness around the time of the attack but it quickly recovered, the Loonie has picked up some strength against the Euro and Sterling which is not surprising considering the weakness in both currencies this morning. The oil price continues to trade above $41 this morning so that is helping the Loonie hold onto strength for the moment.

With only the Richmond Fed Index on the economic calendar today the Loonie should have a quiet day ahead of the Federal Budget at 4:00 this afternoon. I get a sense that this budget is being closely watched by investors as the size of the upcoming deficit will be of interest. I think a budget deficit of $30B has been priced into the currency market at the moment, of interest will be the Governments projection of GDP for the coming years, what the debt to GDP ratio will look like and what is their plan to return to a balanced budget. If the market feels that this is an out of control spending budget then look for USD.CAD to jump higher, if investors feel that the spending and balanced budget plan are reasonable then I think you will see the Loonie jump higher. Given that we won’t know what to expect it may be prudent to lock up part on your forward exposure today and then wait and see what happens.
 

USD

The US Dollar is unchanged in quiet overnight trading to start the new North American trading week, the Greenback is starting to bounce back from it weakness of last week and now seems to be stabilizing again and picking up some strength against Europe. The Us Dollar is strongest against the Pound this morning as one of Cameron’s cabinet ministers resigned over his disagreement with the upcoming budget. The Euro is marginally stronger this morning despite as the ECB Chief Economists on Friday stated in an opposite view to ECB Governor Draghi that EU interest rates may go even lower in the future, fun times again in Europe.

CAD

The Canadian Dollar is a little weaker against the Us Dollar but is still near the low end of the recent range and the Loonie continues to perform very well. The Oil price is opening up at the $41 dollar a barrel price so the Loonie is getting some support from the commodity market to start the week. The Loonie also is holding its own against the Euro and Sterling, both currency pairs have backed off of their recent high levels but still remain a lot higher than they were before the ECB announcement on interest rates last week.

No Canadian economic data this week but we do have some important US data including GDP for the fourth quarter on Friday. Just a reminder that this Friday is Good Friday and a national holiday in Canada, with the Canadian banks on skeleton staff we may see enhanced volatility surrounding this release so make sure you have your orders in early this week to take advantage of any possible movement. Our office will be closed but as I am not wandering too far for the next few weeks I will be at home watching the price activity.

USD

The US Dollar is marginally stronger this morning as it starts to recover from the beating it took after Thursday’s Federal Reserve announcement where the Fed indicated that they would not increase interest rates as often this year as was previously expected. It looks now that the carnage from that announcement has abated somewhat and the Greenback is again trading on US fundamentals for the moment.

CAD

The Canadian Dollar had a quiet overnight session but has been able to hold onto its strength from the past few day including some gains against the Euro and Pound. The last time the Loonie was this strong was the middle of October so it has been on a great run, our currency has been able to benefit from the overall weakness in the US Dollar and the subsequent rise in commodity prices that the weak Greenback has created. It is important to note that nothing fundamental has changed in Canada so all this Loonie strength has been produced by factors outside the country, my fear is (and I have seen this before) that if the situation changes the Loonie will weaken rapidly and USD.CAD will move back higher. UD Dollar buyers should continue to take advantage of this windfall by putting on Forward contracts on any Canadian Dollar strength.

Up today on the economic calendar, we get the Canadian Retail Sales and CPI reports so I am sure we will see more volatility, make sure you have your orders in early to protect yourself against any big moves

GBP

Sterling like other currencies benefitted from the Fed announcement but it also received some strength from the Bank of England Policy announcement yesterday where it kept interest rates at current levels and made no changes to their stimulus program. Unfortunately, Sterling, which had hit a one-month high against the Greenback, has given back a lot of that strength this morning, the threat of an EUO pull-out by Britain will continue to weigh on Sterling until the referendum is held in the summer.

USD
The dollar fall is quite substantial seeing overnight lows of 1.2950. This is attributed to a 400 point drop in the USD/CAD over the fed decision to not raise interest rates. The market surmised that when combined with the general stabilisation of the oil price and Equity markets the Fed may have room to be bullish on US rate hikes. This was not the case and the Fed surprised markets with its reduction in interest rate expectations which led to a fast sell off for the Dollar across the board.

GBP
Soft all day on negative “Brexit” sentiment and despite slightly better than expected jobs data showing average wage earnings growth of +2.1% and a drop in unemployment of 18k. This was followed by a budget with few surprises although the growth forecasts for 2016 and 2017 were downgraded to 2.0% from 2.4% and 2.2% from 2.5% which continued the negative sentiment theme for Sterling. All in all the Pound lost ground to the Euro and Dollar before the FOMC decision and press conference later in the evening. When a dovish Fed took centre stage later on GBPUSD jumped higher but the pressure was still on for GBPEUR as Brexit concerns continue to weigh on the Pound. We look to the MPC meeting at mid-day today for further direction but expect no change in UK interest rates.

Euro
The Euro lost ground to the Dollar pre FOMC in quiet trading as the market waited for the Fed. Analysts have been wondering how the market and Fed were going to resolve their differences of opinion over US interest rates with the market only pricing one rate hike at most this year and the fed supposedly four. Last night the Fed blinked and halved its prediction for rate hikes to two. The beneficiary was certainly the Euro as it had been slipping at the start of the week and this change in sentiment for US interest rates combined with the Euros recent rally in the face of an interest rate cut implies the awaited decline for the Euro may have to wait for a while. We have the Norges bank and SNB both meeting today as well as the BOE so it will be a busy day for the markets.

USD

The US Dollar is marginally stronger in quiet overnight trading conditions as currency traders get set for this afternoon’s announcement from the Federal Reserve on interest rates. The market expectation is for the Fed to stand pat but if they hint that the next rate hike is coming into focus then I think we will see the Greenback jump much higher, if they hint that the global economy is still too uncertain at the moment to allow a rate hike then we will see the Greenback lose some ground. Either way I think we will see some enhanced volatility around the announcement this afternoon so make sure you have your orders in early.

In overnight news the Pound is a little weaker as the unemployment rate for the last three months held steady at 5.1% which was in line with the market expectation, Sterling still trades with a weak bias ahead of the referendum on leaving the EU.

CAD

The Canadian Dollar is unchanged this morning against the Greenback, it looked set to weaken off but a small jump in the oil price seemed to stem that tide. There was an announcement that oil ministers would meet again in April (with or without Iran) to further discuss freezing output levels, such an agreement will give the Canadian Dollar a boost. It is clear that all the commodity currencies are still at the mercy of the oil price for their short-term direction.

In addition to the Fed announcement today we also get US inflation data for February, along with the employment numbers the Fed will continue to monitor inflation data closely to make sure it is growing in their target range, if the inflation rate starts to drop then the Fed will not increase interest rates in the short-term. If we get any surprises from the Fed announcement I will send out a currency alert.

USD

The US Dollar is marginally stronger this morning in narrow overnight trading ranges as the financial markets get setup for key US data today and the Federal Reserve announcement tomorrow. There were no real significant developments overnight, the highlight being comments from the Reserve Bank of Australia that that low inflation means the Australian Central Bank could consider future interest cuts but the movement of other Central Banks to negative interest rates is causing global uncertainty in the world’s economy.

CAD

The Canadian Dollar is weaker against the US Dollar as the announcement from the Iranian Oil Minister yesterday that here would be no quick decision on the levels of oil output has stopped the Loonie strength in its tracks and started to push USD.CAD is back higher. The oil price which at one point yesterday looked like it would break to $40 fell to trade at $36 which was the main reason that USD.CAD started to move higher. US Dollar sellers may want to keep in mind that if we do get agreement on oil production by the big producers then as we have seen this week, the oil price will fluctuate rapidly and the Canadian Dollar along with it.

Up today, we get a slew of economic data including the Retail Sales report for February while I don’t think the Federal Reserve will do anything on interest rates tomorrow a strong showing by Retail Sales today may give the dollar a boost as it will start building pressure for a rate hike down the road.

USD
The US Dollar is marginally higher this morning as the new trading week kicks off in North America. The Greenback started to recover overnight from Thursdays comments that ECB Governor Draghi does not see European interest rates going further into negative in the future. It is unlikely that the Euro could sustain the strength it received from those comments on Thursday so I am not surprised that the US Dollar has started to recover somewhat, we will need to see real signs of a turnaround in the European economy before I will believe that any strength in the Euro can be sustained.

CAD
The Canadian Dollar is marginally weaker against the US Dollar but marginally stronger against the Euro as EURO.CAD slowly recovers from that massive decline on Thursday. I am still quite surprised at the resiliency of the Loonie over the past few weeks, it was able to shake off a poor February Employment report, after initial weakness it spent Friday afternoon getting stronger. It did get some help from the oil price Friday afternoon as at one point it looked like the price of a barrel of oil would jump above $39 but overall the Loonie has been quite strong in the face of dubious Canadian economic data.
Up this week trading will be highlighted by the US Federal Reserve announcement on Interest rates but in addition to that we have a slew of data out of the US and trade and Retail Sales data out of Canada, once again we will have a busy week and volatility will remain high.

USD
The US Dollar is stronger against the majors this morning as the markets digest the actions yesterday by the European Central Bank. As expected the ECB did cut interest rates to 0% and increased the amount of asset purchases that it is undertaking to stimulate the EU economy. On this news, the Euro started to weaken as expected but in his press conference, ECB Governor Draghi stated that he did not anticipate having to add any future stimulus or make any further interest rate cuts. On this statement, the Euro soared with EURO.USD going from 1.0850 to trade as high as 1.1200, even for the world’s most traded currency pair that is a massive move in a very short period of time. This morning the Euro has given back some strength but is still much higher than pre-announcement levels.

CAD
The fallout from the Euro announcement affected the Canadian Dollar yesterday, with the overwhelming strength in the Euro, EURO.CAD moved much higher trading at one point near 1.5000 after starting the day at 1.4500. This weakness in the Loonie also helped push USD.CAD higher during the day but USD.CAD did fall back again overnight testing new weekly lows, there is definitely some resiliency in the Loonie at the moment. As mentioned yesterday I would need to see a clean break below this 1.3200 level to be convinced of further sustained Canadian Dollar strength but it certainly could be on the cards, a strong Canadian Employment report may just do that.
This morning for the Canadian Employment report we are expecting some 10k new jobs to have been created in February. With the jobless rate holding steady at 7.2%, as we have seen in the past this number is very hard to predict so given current market conditions we should see lots of enhanced volatility, make sure you take advantage of it.

Have a great weekend and remember to set your clocks ahead an hour on Sunday.

USD

The US Dollar is marginally stronger this morning as the currency markets await the decision from the European Central Bank on interest rates. It is widely expected that they will further cut interest rates into negative territory and increase the amount of money they are pumping into the EU economy. Investors are a little wary about the decision as they were expected to do all of this last month and they pushed it off until now, if the ECB does not take action today look for a big rally in the Euro.

CAD

After staying pat on interest rates and a rise in oil prices yesterday the CAD had a surprisingly strong day yesterday. At 4:15 pm today Stephen S. Poloz, the Governor of the Bank of Canada, will deliver introductory remarks at the David Dodge Canadian Institute for Advanced Research (CIFAR) Lecture Series, which is presented in partnership with The Conference Board of Canada. With the loonie appreciating sharply, this may be an opportunity for Poloz to pour a little cold water on Cad bulls.

Euro

After last Decembers Euro move when the ECB cut rates and the Euro rallied 3% the market is not holding such a large position at the moment as it waits for the ECB, a tale of once bitten twice shy. ECB President Draghi has told us to expect more stimulus today and at the moment analysts expected  a rate cut of 10 bps and an additional bond purchase of up to Euro 20 billion per month. In a surprize move the ECB cut interst rates to zero. The ECB has also cut the deposit facility rate deeper into negative territory, to minus 0.4%. That means banks are going to be charged more for leaving cash unused in the electronic vaults, rather than lending it to customers. The ECB has also boosted its quantitative easing programme by €20bn, to €80bn per month. Wow, I wish I had that kind of money....then again so does the ECB.

GBP

Having sold GBPUSD over the last 24 hours the market bought some back before the UK production data. The data was mixed with Manufacturing production +0.7 and beating the +0.2% expectations but Industrial production coming in at +0.3% and below the +0.6% expected. With such non descript data the Pound fell back into recent ranges for the rest of the day. It will not be the main focus today-that delight goes to Mario Draghi and his surprizing move.

USD

The US Dollar is mixed this morning as it is weaker against the Yen and stronger against the Pound and Euro. With overnight stocks in China dropping concerns about a global slowdown continue to send money to the safe haven currencies like the Yen and Swiss Franc while the Greenback continues to pick up some gains with against Europe. With the expectation that the ECB will cut interest rates into negative territory tomorrow the Euro remains under pressure for the moment and should remain with a weak bias for the foreseeable future.

CAD

The Canadian Dollar continues to lose ground ever so slowly to the US Dollar, USD.CAD is now some 150 points higher from its lows on Monday as the stronger Greenback continues to push the North American exchange rate higher. Focus of today will of course be on the announcement from the Bank of Canada with the big question being will they cut interest rates or not? My own view is that they will not cut rates at this meeting but they will keep the possibility open for a future meeting, at some point I do think they will cut one more time. That being said the current exchange rate near 1.3400 does afford the possibility of cutting interest rates today, the last time the Bank met in January USD.CAD was trading at 1.4700, if the bank were to cut rates today USD.CAD would have massive jump but would most likely top out around the 1.3600/1.3800 level which I think the Bank of Canada could live with, an interest rate hike in January would have taken the exchange rate above 1.5000 which might have been tough to stomach for the Bank.

USD

The US Dollar for the most part is unchanged overnight, expectation of an imminent interest rate hike have been put on hold as Fed committee member Brainard gave a speech yesterday where he stated that the global financial markets are improving but slowing growth in China and weak global demand still put the US economy at risk. The lack of a follow on rate hike in the near future is more than likely continuing to put pressure on the US Dollar.

In overnight news Chinese exports for the month of February fell 25% from the same period for the previous year, the expectation by economists was for a decline of 12.5% so a significant drop for that particular economy. Oil continues to rebound and looks set to push above $38.00 a barrel, that combined with the resurgence of the gold price could be a leading factor in the rise of the Canadian Dollar.

Sterling remains weak as the “Brexit” will hang over the currency until the referendum. This morning Bank of England Governor Carney came out and said the central Bank would not publish an opinion as to the question of the UK remaining in the EU.

CAD

The Canadian Dollar had a quiet night as USD.CAD moved slightly higher in the overnight session, the Loonie had another great day yesterday as USD.CAD continued to fall throughout the afternoon session and both EURO.CAD and GBP.CAD remain at recent lows. I think these levels create great buying opportunities ahead of the Bank of Canada announcement tomorrow.

Up today we get some secondary Canadian data but for the most part the markets will focus on the oil price and the stock market ahead of the BOC tomorrow. I failed to mention yesterday that this week we also get the European Central Bank interest rate announcement on Thursday, for that we are expecting that the ECB will increase their stimulus package and possible even reduce interest rates to negative territory (that remains to be seen), such a move may push EURO.CAD higher so Euro buyers may want to keep that in mind going forward

USD
The US Dollar is stronger to start the new trading week, it is supported by Friday’s strong US Employment report where 242K new jobs were created and the January number was also revised higher. I am not sure if this is enough positive data to push the Fed to increase US interest rates anytime soon but if we get a few more strong reports like this then they may be swayed. In Europe the Euro is weaker as Germany Factory orders fell last month which is also on the back of a drop in December as well. If the German economy cannot benefit from the increased ECB stimulus then I would say Europe is in a lot of trouble. Not really on the radar at the moment is the fact that the Irish people threw out the Austerity government that had brought them back from disaster over the past few years, the results of the election last week have turned the political situation into a bit of chaos as the parties fight to form a coalition government. If this trend carries across to mainland Europe and responsible austerity governments start to lose more elections lots of pressure will start to mount on European finances. Something to watch for over the long-term.

CAD
The Canadian Dollar is weaker this morning but still very strong and is at its highest levels since the end of 2015, as I mentioned I am still not sure why the Loonie is so strong. When I went on holiday USD.CAD was above 1.3800 so to get to these levels over two weeks is a very significant move. I would still advocate US dollars buyers locking in part of their requirements at these levels and US Dollar sellers now need to lower their expectations of a move to 1.5000 and look back towards 1.3700/1.4000 as levels to lock in forward contracts.
The week’s economic calendar will be highlighted by the Canadian Employment report on Friday and ahead of that we have the Bank of Canada interest rate announcement on Wednesday and some US trade data on Wednesday. More on the Bank of Canada tomorrow and Wednesday but it is not often that we see Canadian economic numbers dominate the week, We should see some fireworks at some point.

USD

The Greenback lost ground across the board as the pressure eased off emerging markets with more price rises for commodities, although oil was unchanged on the day. The market waits for the big US NFP number this morning and a strong figure with firm average wage earnings growth and the market will have to price in a US rate rise sooner than currently expected. The other interest in the US is the way that the Republican establishment is turning on potential Republican Nominee Trump. It appears that the US electorate is happy to vote for Trump as a vote against the establishment. The UK labour party did this when they elected Jeremy Corbyn and discontent with big Government is not restricted to the UK or US.

CAD

The Loonie is up marginally as investors await US Non-Farm Employment Change and Unemployment Rates. This employment number will be a key in determining whether or not the FED will raise its interest rates this month or hold off till they see stronger numbers. Out this morning we have Canadian Trade Balances expected to come in much lower than months previous. Should this number come in better than expected we could see a brief bump in the loonies value only to be taken over by the US news. 

GBP

Three times in a row GBPUSD has fallen on bad PMI data and three times it has bounced back, yesterday managing some 0.75% rise after a services PMI of 52.7 and much lower than 55.1. German Finance Minister Schaeuble said that if the UK did leave the EU Germany and the UK would still trade. When pressed further on the matter he screwed his face up and said he would cry and then continued that the EU deal was good for the UK and good for the EU.

Euro

Eurozone final services PMI came in at 53.3 and above the 53.0 expected which gave the Euro a good reason to push higher which it did later in the day. Overnight trading was quiet for the euro and the market is now waiting for the US Non Farm Payrolls number later this afternoon.

USD
We have two big numbers coming out for USD today. The first is Unemployment claims at 8:30, we’re expecting the number to hold steady at 271K, a miss there could solidfy some of the weakness we’ve seen recently in the US dollar. Following that we have ISM Non-Manufacturing numbers at 10:00 am, here the news is expected to be more positive as we’ve seen continued expansion over the last several months.

CAD
Canadian stead steady against the US dollar yesterday even with non-farm numbers coming out better than expected for the US as a continued strengthening of oil prices have continued to rebound after what may be bottoming out. There’s no Canadian numbers today, so reactions will be to the US numbers coming out. But tomorrow we have Trade Balance numbers released and will let us see if the trend of increasing exports has continued.

Euro
The single European currency has seen a slight rebound this morning although it still remains near its monthly lows. There’s not much upside to the currency with no news releases due to come out for the rest of the week, so traders are left looking towards next week’s ECB meeting and the continued news of the Brexit.

 

USD
The US dollar managed to gain ground against the Yen and later in the day GBP on better than expected Manufacturing PMI at 49.5. This is still below 50 which shows contraction in US manufacturing so the move was muted rather than quick and fast. Against the Commonwealth currencies, the USD was sold after China announced that it had no intention of devaluing the Yuan. Remember that it was this fear of CNY devaluation and the knock on effect that it would have on the Equity markets that started the year off so badly and with this news the oil and equity markets pushed higher and the yen weakened on the back of risk aversion hedges being taken off.

CAD
We still continue seeing the Canadian dollar strengthen against the US dollar in part to a better than expected GDP report, oil and other commodity prices still continue to strength and something also worth mentioning is big banks earning are coming out stronger than expected. That along with the added dividend increase could be causing the recent flurry into Canadian assets increasing the loonies’ value. No major Canadian reports are due out today.

Euro
The single currency is struggling at the moment and despite rising Equity markets it continued to fall in the face of the ECB meeting next week. ECB President Draghi warned of downside inflation risks and the market took this to mean that the ECB will cut rates even more than the 10 bps currently expected. Interestingly enough Swiss manufacturing PMI came in at 51.6 and above 50 for the first time since the removal of the CHF cap a year ago and early this morning Swiss GDP came in above forecasts at +0.4% and much better than the last reading of -0.1%.

USD

Weakened against the GBP and strengthened against the EUR reflecting the GBPEUR move. It also fell against the Yen and Commonwealth currencies as the PBOC cut interest rates and helped overall sentiment. It is Super Tuesday today with analysts suggesting that Donald Trump could win the Republican nomination very soon. US manufacturing PMI will be released today and hopefully give us direction.

Euro

It is clear that ECB president Mario Draghi needs to act on March 10th. Eurozone CPI fell 0.2% YoY with Core CPI (excluding food and energy) could only muster a 0.7% rise. This news will be ammunition for the ECB doves and the EUR was accordingly weak yesterday. In the background the refugee crisis is growing and tear gas was used to control refugees in Greece. The EU scheme to set up reception centres for migrants in border zones in Greece and Italy was forced through by a majority vote. Hungary voted against this move and then announced a referendum on the policy. 

USD

The US Doller is slightly higher this second this week as investors await  US economic data. The US recovery continues with the US GDP and PCE data on Friday pointing to an increase in the pace of the US recovery after a dip at the end of last year. GDP was +1.0% and nicely above the expected +0.4% with the Fed’s inflation gauge the PCE jumping by +0.3% MoM and taking the annual inflation rate to 1.7% from 1.4%. It is still below the Fed’s 2% target and March may well not see a rate hike but last December the Fed warned the market to expect 4 rate rises this year and if inflation and demand continue to rise at recent rates we consider there to be a 50% chance of a rate hike in June.

CAD

The Loonie is flying higher against the US greenback posting gains in excuse of 300 points to reach last Decembers levels. The oil price recovery, as well as strong manufacturing data out of the US, has led us to believe that Canadian raw materials are in demand once again. This makes sense considering the pricing discounts US manufacturers received due in part to the falling value of the loonie months previous. As Canada has not been releasing much data and the date that is released does not show strong support it begs the questions how long will this last?

GBP

GBPUSD exhibited a textbook “Dead cat bounce” on Friday squeezing higher on Friday morning before falling lower again and ending a week when it fell 3.75% on the back of EU referendum fears. This move was despite the BoE warning that UK interest rates would be increased well before the market expected and with the polls only suggesting a 30% chance of a “leave” vote. However, there is a feeling that referendums are often seen as a way of the electorate giving Governments a rap over the knuckles (hence we could get a Brexit vote) and also acknowledgement that the British public do not like or trust the Eurozone to look after their best interests. We have UK PMI readings this week on the data front but of course the main driver will be the referendum-Keep an eye on the polls and the headlines.

Euro

The German Chancellor Schaeuble and the German Bundesbank President Weidmann both criticized the ECB last week for very accommodative monetary policies but the Eurozone inflation (CPI) readings were lower again at the end of last week with Spanish CPI -0.8% against expected -0.5% French CPI +0.2% against expected +0.4% and German CPI +0.4% lower than expected +0.6%. All in all, as Draghi says his monetary stimulus measures must be accompanied by fiscal (tax) and infrastructure stimulus from the European Governments but as yet nothing appears to be changing on that front so it is down to the ECB to give the market even more stimulus. Eurozone CPI will be keenly watched today, it is expected to be weak and it is worth noting that at the end of last week the EUR lost ground as sharply as GBP did against the USD

USD
The dollar is holding steady against the majors as economists await a string of economic data due out later today including the revised consumer sentiment and inflation expectations. Although the US Durable goods data showed the biggest rise in nearly a year, in December we saw a 5% drop but that rebounded in January with an increase of 4.9%. That said, it didn’t have a huge effect on the market and the USD was range bound against the major currencies and weakened against the Commonwealth as oil again had a good bounce. US preliminary GDP and PCE will give us direction later today.

CAD
The Loonie is continuing to strengthen on the oil price recovery aimed at reports that Saudi Arabia, Qatar, Venezuela and Russia will meet in March to discuss capping crude oil production. With the G20 kicking off today in China, you can bet investors will be awaiting for news to trickle out before acting. But make no mistake that once little bits of updates are released investors will be quick to take action. This will surely create some additional volatility within the markets and in the government policy world. You can view the poorly built G20 website here, however, if you are looking for any information prepare to be disappointed. http://g20.org/English/G20Calendar/201512/t20151231_2098.html

Euro
Eurozone final core CPI was as expected at +1.0% but this wasn’t enough to move the Euro out of recent ranges. Interesting German Finance Minister Schaeuble commented that the “Euro exchange rate is somewhat too cheap for the German economy" (again a comment in direct opposition to ECB President Draghi who engineered the EURUSD fall from 1.4000 to 1.0500). The ECB has moved to negative rates and at the moment the banks are not passing these rates on to their customers hence we have seen bank share prices fall. The longer this goes on the more pressure there will be on bank share prices. Fundamentally it is worth noting that Greece last night announced that it won’t cut pensions again to meet EU/IMF demands.

CAD
The loonie continues to strengthen against the greenback reaching 2016 highs. The last time we were at this level it was Feb 3-4. I find it worth noting that the loonie decline that started in December of 2015 was rather gradual however the strengthening seems like it has been happening in very short periods. For example on Jan 20 we were trading at 1.45 later that day we went down to 1.42, Jan 25 1.43 down to 1.4050 Feb 2 -3  (1.4100 down to 1.3650) I mention this because next month is the US Fed interest rate decision (March 16). Could this just be the calm before the storm…

USD
The US dollar is relatively unchanged against the majors this morning as the markets still are unsure of the potential outcome from the British exit and oil prices dipping. US crude oil inventories were at the highest levels for 86 years but the figures also showed that US demand had outpaced supply by 5% compared to a year ago and as such if that trend continues the inventory level will fall. Donald Trump won the latest Republican nomination for the US State of Nevada and makes that 3 wins in a row on top of victories in New Hampshire and South Carolina. Fed Governor Bullard said that it was unwise to keep hiking rates given falling inflation expectations, although US CPI was “hot” in January and Dallas Fed Governor Kaplan added that the Fed was data dependent and that he wouldn’t be surprised to see change in the predicted path of interest rates at the next FOMC. US Durable goods data will give us direction this afternoon.

Euro
Lower on general risk aversion with stocks and oil lower as well in the morning before staging a nice recovery on poor US data and a bounce in oil. Bundesbank President Jens Weidmann said that the ECB must be careful when introducing new measures (careful with your stimulus Mr Draghi, Germany has experienced hyperinflation before) but there is still an overall air of negative sentiment surrounding the Euro as a Brexit would hurt the Eurozone as well as the UK and of course March 10th is approaching. Eurozone final CPI announced today may move us at 10:00.

GBP
The recent moves in GBPUSD could be described as extremely volatile possibly veering on panic and if the market keeps this up everyone will heave a huge sigh of relief on June 23. The EU referendum has induced a 3.3% fall in 2 days for GBPUSD and we are now at levels not seen since 2009. GBPEUR was also hit on Brexit fears and the increase in UK mortgage approvals was promptly ignored. All of the downside targets have been produced in case of a “leave” vote with the actual predicted voting showing only 30% of voters possibly voting for a Brexit. It’s worth noting that the market is trading on fear of an event that only has a 1in 3 chance of occurring. Yesterday evening BoE Cunliffe only stated that the BoE was ready to use policy tools if needed. We have UK GDP due for release at 09:30 today.

USD
The dollar is on its way back up hitting a three week high against the majors aimed on the release of US home sales and FOMC member Bullard set to speak this evening. US oil inventories are out at 10:30am and I expect the US to have a rather higher than expected number here. The G20 is starting this Friday and many investors are comparing this to the April 2009 meeting as they address falling equity markets and currency volatility. Expect the markets to be rather choppy might be a good time to use rate orders if you have end of the month purchases.

CAD
Oil is down 4.5% as Saudi state minister Naimi came out to say that there is “No chance of any productions cuts”. The next set of talks are set to take place in March. As Canada is a commodity currency expect to see further weakening until a decision is reached or we see some other good economic news come out. Early this morning we have Deputy Gov Schembri from the BOC set to deliver a speech on the topic of “Connecting the Dots: Elevated Household Debt and the Risk to Financial Stability” which many investors are worried this will highlight the true effect low oil prices have had on the economy.

Euro
Early trading saw a very disappointing 3rd straight month of contraction for the German IFO business sentiment indicator coming in at 105.7 against an expected 107.0. This is particularly concerning as Germany is the engine room of Europe and it is definitely slowing. The Equity markets pushed lower as they followed oil lower and this gave the Euro some support later in the day, especially against the Pound. We don’t have any Eurozone data due for release today so the Euros moves will be dictated by the other currencies today.

 

USD
The dollar dipped in anticipation of the US economic reports, only to stabilize as investors were neither impressed nor concerned over the data.  Today we have no major Canadian data however we do have key US data that will again illuminate the Feds interest’s rate hike decision process. Out this morning, we have US consumer confidence which is expected to be slightly weaker than previous and US home sales which is also expected to come in under the months previous. This evening FOMC member Fischer is due to present a speech titled “Developments in Monetary Policy” which should be interesting as we are now seeing zero and even negative interest rates being taken on by major banks.

CAD
Oil Prices jumped 7% yesterday however we didn’t see much strength in the loonie. I would suspect that oil may have taken a bit of a back seat with the possible “Brexit” and investors unsure of where to secure their investments. When in doubt retreat to the old “safe” havens that are USD backed. We have no major Canadian news out this morning or rather this week. Tomorrow we have Gov Schembri set to speak early Wednesday afternoon which should highlight future policy that could help the Lonnie regain its strength.

Euro
The quickest fall against the Dollar was Sterling. However the Euro was not far behind as the Oil and Equity markets stayed firm with the commodity markets leading the stocks higher. Eurozone first estimates Manufacturing and Services PMI were both poor and led to weakness in the single currency. European Equity markets also had a good day and this weighed on the single currency. German IFO will be an important indicator of direction at 09:00 today as the market considers the up and coming ECB meeting.

USD
The US dollar is higher against the majors as we see support for a future Fed interest rate hike due in part to last Fridays US core inflation's data which rose the fastest in four years. We waited for the release of FOMC minutes last week when it was confirmed that the Fed hadn’t fallen off their tightrope walk of getting the market to realise that they intend to increase US rates this year by more than once (if that) that the market had been pricing in, without unsettling the markets. The Equity markets rose on the back of this balancing act and this week we have the release of US Durable goods on Thursday and US Personal Consumption Expenditure (PCE, the Fed’s preferred inflation gauge) on Friday to see how the US economy is getting on. Overall, we are already seeing some firmer US data in Q1 2016 with a strong Producer Price Index at +0.9% and Core CPI rising at +0.3% and the most since August 2011.

Euro
The Euro gradually lost ground last week in the face of the Equity market and oil price rises and a gradual realisation from the market that the ECB meeting finishing on March 10th is fast up and coming. Thursday saw some heavy Euro sales across the board and certainly with the EU embroiled in yet another crisis (migration) and inflation remaining stubbornly low it is easy to see why the Euro slipped last week. This week we have Eurozone Flash (first estimate) Purchasing Managers Index for Manufacturing and Services today and Eurozone Final CPI on Thursday, which will be inspected for confirmation that the ECB needs to add further liquidity to the markets on March 10th.

GBP
The main theme of course last week for Sterling was the EU referendum and how this weighed upon the Pound. This pressure on the Pound was slightly alleviated on Wednesday by BoE MPC member Cunliffe, who made it clear that in his opinion the BoE would be in a position to raise rates well before 2019 as the market expects. This brief rally was later annulled as the UK EU negotiations started on Thursday with the UK PM Cameron commenting that “ It is more important to get the right deal than to rush it”. On Friday afternoon, Greece threatened to veto the agreement referencing the migration crisis and France was concerned about giving the City any exceptions to maintain its position but late in the day as deal was announced and the pound rallied quickly. The weekend has been eventful with a Daily Mail poll giving “remain” a 15 point lead and the London Mayor Boris Johnson announcing on Sunday evening that he would campaign for “leave”. This has pushed the Pound sharply lower and with the news that half of Tory MPs will campaign for “Brexit” the Pound may well be under pressure for some time. The coming week is the last full week of the month and as such quite light on economic data releases, so again the main focus for Sterling will be the EU referendum and the UK PM Cameron will explain his EU deal to Parliament at 3.30 pm today.

USD

The US Dollar is unchanged against the majors this morning as the market continues to digest the US Federal Reserve’s lack of resolve to increase interest rates anytime soon and awaits the release of today’s US economic data. Yesterday’s big news was the oil inventory number that showed US Crude inventories grew by 2.1 million barrels to reach a total of 504.1 Million barrels, I heard a report on the news this morning that the last time the oil inventories number was this high was the 1930’s, as you would expect the oil price started to decline on this news and at the moment the price looks like it wants to trade below the $30 a barrel price.

CAD

USD.CAD has moved much higher in the past 24 hours back towards the high end of recent ranges, again the drop–off in the oil price seems to be the culprit, the Loonie also lost some ground to the Euro but with the weakness in Sterling, GBP.CAD is off of its lowest levels but remains at attractive levels.

A busy day on the economic calendar with the release of US and Canadian inflation data along with Canadian Retail Sales for December. I will be interested to see how the drop in fuel prices was offset by higher food prices in Canada, I am not sure there is a net benefit to the Canadian Consumer by lower fuel costs but this release will shed some light on the issue. A higher than expected inflation rate should help to push USD.CAD back lower.

Euro

The Euro is trading weaker against the US as the minutes of the last ECB meeting confirmed that they stand ready to add more stimulus at their next meeting “if necessary”, I think they would be silly not to do something at this point. In the UK Retail Sales increased dramatically in January but it was not enough to push the Pound higher against the US Dollar, Continuing talks in Brussels between the EU and the British Government designed to keep the UK in the EU economic zone areas ongoing, failure to reach some agreement that Prime Minister Cameron can take to the people in a referendum will surely hurt the Pound. http://www.bbc.com/news/uk-politics-eu-referendum-35609968

USD

The US Dollar is mixed this morning as a mostly neutral set of meeting minutes from the US Federal Reserve have not given any clear indication when the next US interest rate hike will be. The Fed did note that they are worried about the global economy and it may lead to a delay in any US interest rate hikes if conditions worsen. Overall I think the statement was pretty much as expected, the US Dollar should trade with a strong bias ahead of the next Federal Reserve meeting.

The Price of oil keeps moving back higher and is now over $31.50 a barrel as I write the commentary. There was a meeting between Iran, Iraq and Venezuela yesterday and it is expected that they will also hold production at current levels.

CAD

The Canadian Dollar continues to benefit from the stronger oil price with USD.CAD is falling to its lowest level this year. The Loonie has also picked up some great gains against the Euro and Sterling and those two currency pairs are at their most attractive levels in many weeks, if you do need these currencies in the short-term these levels have to be considered attractive as compared to this time last week.

Up today we get the US Leading Indicator report for January, the Philadelphia Fed Index for February and the Canadian Wholesale Trade report for December, again if we get poor US numbers we should see USD.CAD drop lower.

Euro

The Greenback was stronger against the Euro overnight as the Euro markets awaited the minutes from the last ECB meeting, again the market is looking for any signs of increased stimulus to the Euro-Zone economy. The other big mover overnight saw the Pound, which pulled back some strength against the US Dollar.

CAD

Nothing to report from overnight trading on the Loonie, as mentioned above USD.CAD traded in a very tight band, the markets should remain quiet ahead of the Fed minutes release this afternoon. The Loonie continues to trade with a weak bias against the Euro but has picked up some strength against Sterling as that currency continues to trade weaker.

The oil price has stabilized as there are reports of a meeting between Iran, Iraq and Venezuela taking place with the hopes that they too will stabilize the production of oil.

USD

The US Dollar is unchanged this morning from yesterday’s Toronto close in what looks like very uninspired overnight trading. Investors are now awaiting the release this afternoon of the US Federal Reserve minutes from their last meeting, they will be looking for any sign of what the Fed will next do on interest rates. Any hint of the committee favouring a rate hike shortly should push USD.CAD much higher and the opposite will occur if they feel that no more rate hikes are warranted this year. If they are vague, then we will have more of the same.

In addition to the Fed minutes, we have a slew of US secondary US economic data coming out this morning, for the most part, these will be ignored unless there is a huge surprise within the release.

Euro

The Euro stayed range bound as it was caught in the crossfire between GBPEUR and the European stock markets. German ZEW February economic sentiment fell from January’s 10.2 to 1.0 although this was better than the expected zero. Recent data has been poor for Germany and indicates that its economy is slowing down.  One of Germany’s “wise men” (The German council of economic experts) Peter Bofinger warned of a Eurozone bond crisis because of the plan to enforce haircuts on bondholders if banks go bust which didn’t help Euro sentiment.

CAD

Canadian Dollar trading was quite subdued for most of the Family Day holiday but the Loonie started to pick us some steam as the oil meeting was made public, USD.CAD fell over 120 points as the meeting progressed but as the announcement disappointed the markets USD.CAD rallied back and at this point has almost recovered all its losses, if the oil price continues to drop look for USD.CAD to continue to push higher.

USD

The US Dollar is stronger this morning against the major currencies and marginally weaker against the Canadian Dollar from where we left everything on Friday. All currency trading was affected by this morning’s meeting between the world’s two largest oil producers, Russia and Saudi Arabia in Qatar. Markets were looking to see if there would be any production cuts announced but instead the meeting disappointed financial markets by announcing that they would keep production at January 2016 levels. The price of a barrel of oil had risen by 5% when this meeting was made public but has since fallen back when the announcement disappointed the markets.

GBP

GBPUSD was quiet and range bound as it was a US holiday and then followed the EUR lower as that dropped while Draghi spoke. HSBC announced that it has decided to keep its HQ in London and also that it would move 1,000 jobs to Paris if the UK left the EU. We have the release of UK CPI, RPI and HPI today at 09:30 am which will give us direction. The latest Com Res poll for ITV news shows that 49% of Britons would vote to stay in the EU, with the lead dropping from 18 points to 8. It is worth noting that 42% of those polled said that they may still change their mind ahead of the referendum.

Euro

Soft on the back of the strong Equity market bounces and sold in expectation of dovish comments from ECB President Draghi. It continued to fall as Draghi spoke and commented that “headwinds need monitoring" and that “deterioration in market sentiment has gathered pace.” All in all he was looking to reassure the markets not to get too concerned about the European banking sector and the Equity markets steadied on the back of his testimony. German ZEW is released at 10:00 and will provide some direction this morning.

CAD

Again we have seen USD.CAD trade in a volatile range with a 100 point movement again last night. The Loonie had been getting stronger but when the free-fall in the oil price hit the market, then the Loonie gave back all its gains and is now testing the recent highs, USD.CAD at the moment looks like it wants to go back higher. Both the Dow Jones and the TSX are pointing lower to start the day so the rout in stocks will continue to unfold and the Loonie should remain under pressure.

The price of oil continues to free-fall on global oversupply and lack of growth in the global economy. Overnight the oil price fell to trade as low as $26 dollars a barrel, reports yesterday confirmed that while overall supply was a little lower the supply of oil at the Cushing, Oklahoma facility (the largest in the US) reached record levels. Oil in recent weeks has become very reactionary to the weekly inventory reports, so much so that I have had to start paying attention to them which I have never done before.

USD

The US Dollar is marginally weaker this morning as the market digests yesterday’s comments from Yellen that US Interest rate hikes could be delayed by uncertainty in the global economy. In overnight news the Swedish Central Bank (the Riksbank) cut interest rates last night moving that country into further negative territory, rates were at -0.35% and now are at -0.5%, they also indicated that they are injecting more stimulus into the Swedish economy. Clearly there is growing uncertainty from the world’s central banks about global growth and the financial system, my big fear now is that when China reopens their markets on Sunday night that Chinese stock markets will get hit hard and all the downward pressure will start all over again.

CAD
The Canadian Dollar was again the most volatile currency pair yesterday moving back and forth in its recent range, USD.CAD fell quite a bit in the morning but as the oil price dropped in the afternoon the Loonie gave back most of that strength. This enhanced volatility we are seeing for USD.CAD should be viewed as an opportunity by both US Dollar buyers and sellers, it is the perfect opportunity to leave overnight orders in the market and gain more value out of your transactions.
Oil has been as low as $28.30 during the night and opened in North America at $28.50. While I don’t think USD.CAD is as closely linked to the oil price as it has been in recent weeks if we get another big drop today USD.CAD should push higher.

USD
The US Dollar is, for the most part, unchanged this morning, it is higher against the Euro and lower against the Pound in very narrow range trading. The Pound is trading a little stronger this morning despite some very poor economic numbers earlier this morning. December Manufacturing production fell 1.7% after falling 2.1% in November and Industrial Production fell 1.1% in December so I am not sure why the Pound should recover like it did but I still look for it to trade with a weak bias over the coming weeks.
Nothing of note on the economic data front today but the markets will instead focus on US Federal Reserve Chairperson Janet Yellen’s testimony before Congress. Financial markets will be looking for any indication of the next interest rate hike in the US, if she hints that none are forthcoming due to poor US economic data then look for the Greenback to take a big hit across the board.

CAD
The Canadian Dollar continues to range trade between the 1.3800 and 1.4000 levels, overnight saw USD.CAD drop about 100 points and this morning it has recovered almost all of that drop, USD.CAD continues to be one of the most volatile currency pairs in the market. The price of oil dropped below the $30 a barrel level last night and remains below that level this morning, with the lack of other factors in play at the moment the Loonie may go back to tracking the oil price to get some direction, it is still worthwhile to keep an eye on it.
Nothing on the economic calendar today so USD.CAD should remain in recent ranges but if the oil price drops towards $29 a barrel USD.CAD should move back above 1.4000.

USD
The US Dollar is marginally weaker against most currencies this morning in quiet overnight trading conditions. With Chinese markets closed for the Lunar New Year holiday, the only driver of the market continues to be fear of a slowdown in the Global economy. Overnight Japanese stocks were down 5.4% and in Europe investors continue to sell financial stocks expressing concern about the health of European banks. The Euro is a little stronger this morning despite a poor showing of German Industrial Output, which fell 1.2% in December, the largest Euro economy ended 2015 with some weakness. The ECB may look at this and decide to add more stimulus to the economy a move which should push the Euro lower.

CAD

The Canadian Dollar traded stronger against the US Dollar for a good part of the night but has given back that strength and USD.CAD is right where we left it on Friday. The disappointing employment numbers out of the US (only 150k new jobs were created) and Canada (lost 5k jobs) helped push USD.CAD higher on Friday, it certainly looks for the moment that the Loonie has seen its best days and it may be in for another bout of weakness with USD.CAD is moving back higher.

A light week for the North American economic calendar which will be highlighted by the US Retail Sales report on Friday. Throughout the week we get some secondary US data and the Canadian Wholesale trade report for December, I will be looking to see if the US data continues to point to a possible slowdown in the recovery, such a scenario will continue to put pressure on US stocks and continue volatility in the Currency market.

USD

The US Dollar is higher to start the new trading week, ongoing concerns about risks to the global economy and a renewed drop in the oil price have pushed European equities lower and given the Greenback some strength on the safe haven effect. EURO.USD has fallen about 100 pips from its overnight high and is trading at 1.1120, Sterling has dropped even further with GBP.USD down over 140 pips and trading at 1.4400. The Loonie has fared a bit better as a result with both EURO.CAD and GBP.CAD trading lowers this morning.

CAD

The strong run that the Loonie has been on over the past couple of days came to an abrupt end yesterday, USD.CAD hit bottom almost 10 basis points from its high of the year which in a the matter of three weeks is a huge move and underlines the volatility we are seeing in the currency markets. As I mentioned earlier in the week, the Loonie seems to have decoupled itself from the oil price for the moment, but if we do get a big swing in oil we will see the Loonie volatility ramp up once again.

In addition, to the US Employment report, we do get the Canadian Trade Balance for December and Employment report for January where we are expecting 5K new jobs to have been created (22.8 in December). The US report will take precedent in the overall market but given the strength over the past few days in the Loonie, I think it will become very reactive to a weak Canadian report and USD.CAD could move much higher. If we get a poor US number and a strong Canadian number then USD.CAD could move back to test the lows of the week.

USD

The US Dollar, for the most part, is unchanged in overnight trading as financial markets await the January Employment Report amid fresh fears that the Federal Reserve may not increase interest rates again this year. Late 2015 and January 2016 US data have tended to be on the more negative side, this is starting to reflect in the overall US Dollar as it has lost some momentum over the past couple of days. On Wednesday US Federal Reserve Member Dudley said a strong US dollar would have a negative effect on the US economy so the Greenback has been hit hard. EURO.USD has topped out at 1.1200 for the moment, the last time we were this high was in October of last year. For the US Employment report, we are expecting 190K new jobs to have been created last month (down from 300K In December) if we get a very poor number the US Dollar may get routed.

Euro

In other overnight news, the strength in the Euro was limited as Germany reported a decline in factory orders in December, this could be a further indication of more stimulus measures are needed from the ECB next month.

USD
The US dollar is still sliding lower against the majors this morning as investors have doubts that the FED will raise interest rates this year. If you have payables in USD this could be a great time to start to look at locking in your rates as we have dropped from 1.47 to 1.37 in the last 12 days. This morning we have US unemployment claims which is set to add just 1000 more workers than the previous month. Factory orders m/m are due out this morning as well which is expected to be - 2.3% If this news comes out better than expected we could see the green back strengthen.

CAD
The loonie strengthened against the green back as investors took note of another big merger in Canada with the 3.2 Billion Lowe’s and Rona deal. It’s always been my opinion that global investors forget about Canada and they need to see big deals such as this to remember Canada still has a lot to offer. Oil is down this morning but still trading above the $31 - $32 mark. Could this be a sign that oil will be back on the up? This could signal Loonie strengthening a bit further this week especially as tomorrow we have CAD and US unemployment numbers coming out.

Euro
The German bond market gave the clue to the EURUSD move and with yields on German Bonds making new all-time lows (meaning that investors get less money back when they invest in a bund as they want security rather than return) the EUR pushed higher in the afternoon. The move into the EUR was driven by a move out of the USD as US data was again not very positive and Fed Governor Dudley was also blamed for USD weakness. Analysts are now looking for more EUR strength as it is breaking out of its recent range against the USD and the weaker EUR and oil price are both positive factors for the Eurozone which has a trade surplus and is an importer of oil. Draghi spoke early this morning and despite saying that the ECB will not surrender to low inflation implying more easing in March the EUR held its ground.

 

CAD

USD.CAD is much lower this morning; I am not sure quite why as the oil price is down significantly but it may have something to do with the RONA announcement this morning. In talking to a few clients on why I thought the Canadian Dollar would do better in the 2nd half of the year. One of the reasons I mentioned this was, that during the time of extreme Canadian Dollar weakness  we tend to see more M&A activity in our economy. Last night was a perfect example of that as Lowes bought RONA Canada for over $2 Billion. Big deals like this can have a short-term effect on the Canadian Dollar as it creates temporary demand, do enough of them over the short-term, and it can turn into a significant rally for the Loonie.

This is the 2nd day this week that I have seen the USD.CAD exchange rate decouple from the price of oil, oil has dropped over 6% this week, and the Loonie has managed to stage a rally. Oil has moved back a bit higher this morning above $30 a barrel; it will be interesting to see how the Loonie fares if the oil price stabilizes over the next few months.

USD

The US Dollar is marginally weaker this morning, with most of the activity coming against the Pound. GBP.USD was higher this morning as reports of their services sector showed they were doing much better to start the year than economists had predicted. In Europe the Euro was marginally stronger as the December Retail Sales number was slightly better than expected, overnight markets will tend to be quiet over the next week as China shuts down for the week-long New Year’s holiday period.

We do get the ADP employment report and some Services data out of the US today. For the most part USD.CAD trading should be subdued; US Dollar buyers may want to look at hedging some exposure at these levels if they have not already done so

CAD
The Canadian Dollar had a great day yesterday, and this was despite a big drop in the oil price. There did not appear to be any reason for the big drop in USD/CAD  yesterday, so we encouraged many US Dollar buyers to take advantage of the move. Overnight USD/CAD went back to form as the oil price fell to just above $30 a barrel and USD/CAD moved back higher by 100 points.

USD
The US Dollar is again weaker this morning, and it is more of the same that we have seen over recent weeks, a drop in the oil price and poor data economic data out of China. In China the manufacturing data showed that activity dropped for the sixth straight month, surprisingly Chinese stocks are slightly higher overnight, but European exchanges were dragged lower.

Euro
In Europe the unemployment rate fell to 10.4% in December, the Euro got a bit of a boost on this report as it is the lowest the rate has been since 2011. EURO/USD is trading at 1.0900 which is the highest level since November of last year. Sterling was under pressure for part of the night as UK Construction data disappointed the market, GBP/USD fell to trade at 1.4340 but has recovered to trade back up this morning at 1.4440.

CAD

The Canadian Dollar is weaker across the board as the poor Chinese data and the subsequent drop in the oil price has pushed USD.CAD higher, the Loonie has also lost ground to both the Euro and Sterling as overnight strength in those currencies have hurt the Canadian Dollar. It looks like more of the same for February, the Loonie will track the oil price and will be vulnerable to data coming out of China and the US.

The first week of the new month has lots of secondary US data on tap including Personal Income and Expenditures, 4th Quarter Productivity and Factory Orders for December, the week is capped off the by US and Canadian Employment reports for January on Friday. It looks like volatility will still be on the cards, and we should see some big moves.

USD

The US Dollar is weaker this morning as poor economic data out of China and concerns about global growth continue to weigh on the Greenback. In China, it is more of the same as manufacturing data came in weaker than expected, EURO.USD rose to trade at 1.0870, but that jump was somewhat muted as the Euro-Zone also published weak economic data. It also looks like Europe is in for a lot so socio-economic problems in the coming months as Germany is starting to come out of taking on the migrants and has indicated that those that are already in the country will be sent home, I can`t imagine that will end very well.

For today, it looks like USD.CAD wants to go higher on the back of the falling oil price, if the US numbers for today disappoint the market then that might give the Loonie a bit of a reprieve, overall I still favour a push higher for the Greenback (a weaker Canadian Dollar). US Dollar buyers need to grab their opportunities whenever they see a dip in USD.CAD.

CAD

The Canadian Dollar is, for the most part, unchanged against the US Dollar this morning. For weeks now you have seen me say that the Loonie is tracking the oil price, yesterday a rumour hit the oil market that OPEC and Russia were having a meeting to discuss the oil price, on this rumour oil jumped to over $34 a barrel and USD.CAD dropped by 100 points, in a matter of five minutes the rumour was denied, the oil price dropped and USD.CAD went right back up.

Trading should again be busy today as we get both the US (3rd quarter) and Canadian (November) GDP data to close out the month. The recent US data has been somewhat disappointing, so if we get a poor number, then we could see USD.CAD drop back a bit. Obliviously a poor Canadian number will push the exchange rate higher.

USD

The US Dollar is marginally stronger this morning against both the Euro and Sterling but the star of the overnight show was the Japanese Yen where USD.JPY soared. This morning the Bank of Japan was expected to keep their interest rate and stimulus program at current levels but instead the surprised the markets by lowering interest rates to negative territory at -0.1%, Japanese Commercial banks will now have to pay the Central Bank to hold money on deposit. The obvious idea behind this move is to get the stagnant Japanese economy moving by the banks leading more money into the economy, it remains to be seen if this will work but this is the first major Western economy to move into negative interest rates (could Canada be next?). USD.YEN which has been trading at 118.50 before the announcement moved to trade at 121.00, CAD.YEN which was trading at 84.50 before the announcement traded as high as 86.50 before settling back. If you are a buyer of Yen, you have just had a big win with this move in the rate.

Euro

In Europe, the Euro was a little softer as the annual inflation rate rose by 0.4%, which was in-line with expectation and is not so high that it would prevent the ECB from adding more stimulus at their next meeting, EURO.USD did not have a big range but did trade a little weaker on the news.

CAD

As I mentioned yesterday I thought the Canadian Dollar would have received a boost from the dovish Fed statement but almost immediately USD.CAD pushed higher as both stocks and oil fell back. Overnight USD.CAD had a very busy night moving back and forth a couple of times to cover 100 point swings, but we open here pretty much where we left it last night. The price of a barrel of oil remains above $32 a barrel, so the Loonie is still garnering some support at the low end of recent ranges. Both EURO.CAD and GBP.CAD have moved back higher with the overnight strength in those currencies.

Up today, we get the US Durable Goods report for December, for the most part, USD.CAD will continue to track the price of oil; I would not be surprised if the Loonie had another rally in it with USD.CAD is testing the lows over the past few days.

USD

The US Dollar is weaker this morning as the markets digest what is being considered a dovish statement from the US Federal Reserve. As I said yesterday in the currency alert, the Fed does feel the economy can maintain its momentum even with more rate hikes but they did not give any indication of when the next interest rate hike will occur. I think it will be steady as she goes for a while and they will continue to monitor the data on the economy and see how the global economy develops.

In other overnight news, Sterling jumped higher overnight as the fourth quarter GDP report showed the economy grew by 0.5% matching expectation, on a year-over-year basis the economy grew at a 1.9% rate the smallest increase since 2013.

GBP

Both British Bankers Association UK mortgage approvals and the Nationwide House Price Index were lower than expected but were initially ignored by the FX markets which bought Sterling in preparation of the FOMC statement in the evening. However, the Pound took a tumble at the end of UK trading on fears that after hiking rates last month the Fed couldn’t be overly dovish, and so it turned out to be. This kept the pressure on the Pound which is now waiting for 09:30 UK GDP for next direction. A strong figure sees us push up to recent highs and a weak figure the reverse.

Euro

Generally quiet before the FOMC meeting although it was noted that there was some month end selling of GBPEUR by European corporates. After the Fed’s “steady as she goes” statement the EUR stayed in recent ranges.

CAD
The Canadian Dollar is back at its most recent strongest level, but we still see USD.CAD is tracking the oil price and looks to do so for the foreseeable future. GBP.CAD continues to recover as it moves lower on Canadian Dollar strength and Sterling weakness, given the recent volatility in the Pound these levels for GBP.CAD should be attractive for Sterling buyers.

USD
The US Dollar is marginally weaker this morning in quiet trading conditions ahead of the US Federal Reserve announcement on interest rates this afternoon. With little economic news out overnight the currency markets just reacted to the oil price, and as it moved slightly higher (back above $30.50 ), the Greenback was sold off.

As mentioned trading today will be dominated by the announcement by the US Federal Reserve on interest rates. Last month in December the Fed increased interest rates for the first time in 10 years, this time, around we are not expecting any change to the interest rate but financial markets will be looking for the forward guidance to see when the next hike will occur. If the Fed indicates the next rate hike is imminent, and they are on course for further hikes throughout the year look for USD.CAD to jump back above 1.4200, if the come out and say that the economy does not warrant any more hikes in the immediate future then we will see USD.CAD drop back below 1.4000. As always I will send out a currency alert around the time of the announcement

Euro
Pushed higher to start with on lower Equity markets and then fell as the oil price bounce pushed Equity prices back up. There wasn’t any top tier European data released, so the Euro drifted for the rest of the day. Italian banks are under pressure at the moment with non-performing loans exceeding Euro 200 billion. This is starting to worry investors as the recent law changes now mean that if a bank goes bust, then the losses will come from investors and depositors rather than the authorities. In this case, the more negative sentiment grows over Italian banks, the more likelihood depositors will take their money out and produce a bank run. Deutsche Bank also commented yesterday that a “Brexit” would devastate the EU (let alone put the UK under severe strain). Against the backdrop of the increasingly desperate EU migrant crisis the EU and the UK may well see an agreement over the UK’s renegotiation conditions as an easy agreement to make.

CAD             

USD.CAD is lower from its yesterday highs in spite of the oil price dropping below the $30 a barrel threshold at one point overnight; it has recovered this morning to trade back at $30.50 a barrel so that most likely tracks the decline in USD.CAD. No change in my view of the moment, I still favour another jump in USD.CAD and US Dollar buyers should be looking at these levels to put on some forward contracts to protect themselves. EURO.CAD and GBP.CAD are also at recent lows and look attractive for short-term buyers.

Up today we get some secondary US data including the Consumer Confidence report, barring any surprises USD.CAD should continue to track the oil price. I will go into more detail tomorrow on what we are expecting from the US Federal Reserve.

USD

The US Dollar is unchanged for the most part this morning; the Greenback held steady despite a fresh drop in the oil price and a late sell-off in the Chinese stock market on growing concerns about growth levels in the Chinese economy. As I said yesterday nothing has fundamentally changed in the past week to warrant a change in my view of the global financial picture so this movement is just more of the same that we have seen over the past few weeks. Markets should start to calm down later today as we get ready for the Federal Reserve announcement tomorrow afternoon.

GBP

GBPUSD had been quietly sold in early Monday trading and received an additional push lower with the CBI Industrial Trends survey coming in at -15 and much worse than the expected -10. GBPUSD was unable to break technical support levels, and both GBPUSD and GBPEUR stayed in recent ranges while the market waited for ECB President Draghi in the evening and then BOE Governor Carney this morning. Late in the afternoon MPC member Forbes comments to Parliament tomorrow were released early, and although she said that the jobs market is now “stronger” than recent pay growth figures have suggested, she continued to say that it would be premature to raise interest rates at this stage. GBPUSD slipped a little on her comments and now waits for Carney to speak this morning. He may well be asked questions on the EU referendum and his answers could easily cause volatility for Sterling.

Euro

Had been soft overnight and certainly wasn’t helped by the German IFO release which showed a slowdown in the German economy falling to 107.3 from 108.4 . However, when the oil rally faltered after Saudi Arabia announced that it was “able to withstand low oil prices” the EUR gained ground against the Pound and its developed market peer group. It was interesting to note that  ECB President Draghi was focused on credibility in a speech he made last night saying “Meeting our objective is about credibility. If a central bank sets an objective, it can’t just move the goalposts when it misses it”. ECB policy makers have less than 10 weeks until a March 10th meeting when they’ll decide whether their current stimulus programme is enough to meet their inflation goal of just under 2%. With the falling oil price weighing on consumer prices, Draghi is trying to convince the markets that the central bank remains willing to act if needed.

CAD

USD.CAD has given back some gains this morning as the great run the Loonie was on has come to a grinding halt, comments out of Saudi Arabia that they are not planning any oil production cuts has pushed the oil price lower, and the Loonie suffered as a result. None of the fundamentals have changed for the Loonie or the price of oil, so I look for both instruments to remain under pressure; US Dollar buyers should be looking to buy some forwards at these levels.

Trading this week will be highlighted by the Federal Reserve announcement on interest rates due out on Wednesday, we are not expecting a rate hike at this stage, but the markets will be looking to see if the Fed still thinks more rate hikes are imminent. In addition, to the Fed, the month finishes off with GDP data from both the US and Canada, so we should have a busy week to end the month.

USD

The US Dollar is mixed again this morning; it is weaker against the Euro and stronger against both the Canadian Dollar and Sterling. The Euro is surprisingly stronger the morning as some German business data came in weaker than expected and the call for more stimulus by the ECB continues to weigh on the common currency, I would expect the Euro to trade lower through the week especially if we get a rate hike from the Fed later in the week.

Euro

The market was still full of ECB President Mario Draghi’s news and an indication of more policy stimulus to come on March 10th, and the early Eurozone PMI estimates were lower than expected and indicated a slowing Eurozone economy. This weighed on the EUR which was still soft, especially against the commodity currencies which were also enjoying an oil-induced bounce as the price for Brent crude was up some 6% in the morning along with the European stock markets. Oil finally finished up 20% over the last 48 trading hours. That translated to $6 and analysts still expect another test lower at some time over the next few months. ECB President Draghi speaks tonight, and we have Eurozone CPI on Friday.

Be aware of event risk for the Euro in the form of the migrant crisis. Germany has already accepted some 1.1 million refugees and is not closing its doors to more. However, this extraordinary movement of people is putting huge pressure on the Schengen or freedom of movement in Europe. Angela Merkel has already said that if Schengen falls then, there is no point in the Euro and Sweden, Denmark, Germany, Austria, Slovenia, Netherlands, Hungary and France have all introduced “temporary” six-month frontier controls due to expire in the spring. In particular, Austria has set a limit on the number of migrants it will accept. If other countries decide to do the same and set up border controls or even if there is a two-year temporary suspension of the Schengen agreement the Euro is at risk of collapsing and we will have unprecedented volatility. The probability of this currently stands at 20% as the politicians know how crucial the Schengen agreement is but last week George Soros no less commented that the EU is on the verge of collapse with the migration crisis being a real threat and the EU having a need to integrate the migrants. EU Commission President Juncker also went on record and said that Europe has to solve the refugee crisis in two months otherwise the Schengen agreement could fail.

CAD

The Canadian Dollar is having a tremendous run the past couple of days, with the Bank of Canada not cutting interest rates and the ECB driving the price of oil up with the call for more stimulus, USD.CAD has dropped some 500 points since Wednesday, I would call this a long overdue correction but how far the Loonie will run is still anybody’s guess. The fundamentals of the Canadian economy have not changed; I still think the Bank of Canada will cut interest rates at some point this spring and USD.CAD will most likely take another run at the top side. US Dollar buyers should be very prudent and look to put on some forward contracts at these levels to protect against such a move, if USD.CAD continues to fall, and this emerges as a whole new trend then you will still be positioned to take advantage of it.

UP today we get US Leading Indicators and Canadian inflation data. I will be looking to see if the weak Loonie is leading to higher inflation, on Wednesday the BOC said the risks to inflation are balanced but if inflation starts to rise then they will not be able to cut interest rates, and that will lead to a stronger Canadian dollar.

USD

The US Dollar is mixed this morning; it is marginally stronger against the Euro, weaker against Sterling and much weaker against the commodity currencies. The Euro remains under pressure as yesterday ECB Governor Draghi announced that the ECB is looking to review the level of stimulus being provided to the Euro-Zone economy, this was not overly expected and has shaken up the currency markets a bit. This morning Germany reported some poorer than expected manufacturing numbers, so it appears early on that more stimulus is warranted.

Oil

The oil price jumped significantly on the ECB news as throughout the night the price rose to trade above $31 a barrel, in the early hours of the 20th it was trading below $28 so a good sized recovery for the oil price. Will this be sustainable? I somehow doubt it, the root causes that drove oil lower (oversupply in the global markets, a slowdown in the Chinese economy and mid-east tensions) are all still in place, I would fully expect that we will see further pressure on the oil price in the coming weeks.

CAD

The announcement that the Bank of Canada was not going to cut interest rates this time around led to a very volatile day for the Loonie yesterday. On the initial report USD.CAD fell over 100 points in a few minutes, it spent the next hour going right back up to pre-announcement levels and then over the past 24 hours has again retreated to its lowest level in the last 48 hours. The Bank has lowered its growth expectation for the Canadian economy but still sticks to its view that the economy is transitioning away from a resource-based economy, and the economic picture should improve in the 2nd half of the year. I will stick with my view that USD.CAD still has room to break to the topside and then in the 2nd half of the year we will see some improvement for the Loonie, for now, currency markets, will remain quite volatile.

USD

The US Dollar is for the most part unchanged this morning as the markets await the European Central Bank announcement on interest rates due out shortly. We are not expecting any changes to their current program but it will be interesting to see if Governor Draghi indicates the need for future stimulus, if does call for more stimulus we could see the Euro start a new run lower.

Euro

There has been a significant pullback in both EURO.CAD and GBP.CAD from their recent highs, if you need to buy some of these currencies you may want to look at these levels as a good opportunity.

As mentioned above the markets are waiting to hear from the European Central Bank but we will also get the Philadelphia Federal Reserve Business Index which will give us some direction as to the strength of the US recovery. Lost in all the Bank of Canada news yesterday was the US Inflation report that showed inflation in the US is running below the Fed’s target which may put some pressure on the Fed to keep interest rates low and delay any more rate hikes.

USD
The US Dollar is marginally stronger this morning as an overnight rout in stocks has investor running to the safe haven of US Treasury Bills. All stock market were down overnight some as high as 4%, the continued decline in the oil price is putting pressure on global growth and yesterday’s downgrading of global growth expectation by the IMF is having a ripple effect around the world. At the moment, the Dow Jones is pointing lower this morning by over 300 points since the start of the year stock prices have just been hammered and it is not looking like it will turn around anytime soon.

CAD
As you would expect with the weak oil price USD/CAD has moved higher and hit new multi-year highs above 1.4600. At the moment there is no end in sight to this destruction of the Loonie, oil is forecast to continue to drop, and that will push USD.CAD ever higher, everybody is looking to see where the currency pair will top out before recovering, but that appears a long way off at the moment. The market will be looking for a response from the Bank of Canada in today’s policy. With no Federal budget now expected until April, the new Government has not had much of a response to the crisis.

At the start of the week, Bloomberg research showed that 70 – 75% of economists believed that Canada will cut its interest rate. Yesterday that number dropped to 50%. I believe that we will not see a rate cut today but will hear something worth noting as Gov Poloz has said many times he isn’t opposed of thinking outside the box. This morning as we climb past 1.4650 I believe at 10 am we should see this number fall no too much but still enough to make it a good buying opportunity.

GBP
In the UK, Sterling rose last night as the Unemployment Report showed the unemployment fell to 5.1% the lowest level since 2006, perhaps these numbers will start to turn around the recent fortunes of the Pound.

Euro
Best described as a range bound beast and certainly against the background of weak oil price and weak stocks the EUR is staying firm. European stock markets are sharply lower this morning indicating more of the same moves that we have already seen this week. The ECB’s Villeroy positively commented that the ECB’s stimulus is boosting growth by 1%. Thursday’s ECB meeting is the main event for the EUR this week.

USD
The US Dollar is again mixed this morning as it is stronger against the Euro and weaker against the Pound. In the overnight news, the Chinese economy reported that 2015 GDP growth came in at 6.9% which met the market's expectation but is the slowest growth rate in 25 years and confirms that their economy is losing momentum. Also, to the Chinese news, the International Monetary Fund reduced their global growth forecast for 2016 to 3.4% and the 2017 forecast to 3.6%, clear signs that the slowdown in China is having an effect on the global economy.

CAD
The Canadian Dollar is stronger this morning as it received some benefit from a rise back above $30 in the oil price. USD.CAD is now 130 points below its high from Sunday night; these are the kind of moves that US Dollar buyers need to look at and pick up some US when they happen. Many banks and economists are suggesting that tomorrow we’ll see a rate cut however a few of our traders and I believe that Canada will not cut its rate. 60 - 70% favor of a cut. This could mean that the market has already priced in the cut meaning we could see the loonie gain if only for a brief period. Great time to put in those rate orders ;)

GBP
The Pound which has been trading with a weak bias over the past few months has been bucking the market trend over the past couple of sessions. This morning Sterling jumped on an inflation report showed inflation started to creep higher in December, further inflation hikes may have to force the Bank of England's hand and increase interest rates sooner than they wish but overall Sterling should continue to trade with a weak bias over the short-term.
 

USD
The US Dollar is mixed this morning as it is higher against the Euro and lower against Sterling. In overnight news the Chinese Central Bank increased the reserve requirement that offshore banks must maintain in their accounts to curb speculation on the Chinese Yuan, investors have been betting against the Yuan in recent months saying the Chinese slowdown is much deeper than reported and that the Yuan will continue to fall.

CAD
The Canadian Dollar returns to the same Fridays level of trading as over this weekend we seen the Canadian dollar fall to 1.4600 (.6850) but as the oil price went back above $29 a barrel USD.CAD fell back and trades back near the 1.4500 level. Once again we see the Loonie almost exclusively in correlation with the oil price that should continue for a while yet.

Today should be relatively quiet as US markets are closed for the Martin Luther King holiday but this could just be the calm before the storm as we have a busy week on the economic calendar, in the US, we get the December CPI report, the Philadelphia Fed Index and Leading Indicators. Most of the focus will be on the Canadian market where we get Retail Sales and CPI on Friday but of most importance will be the Bank of Canada Interest rate announcement and Monetary Policy Report on Wednesday. Given what happened at the start of the year, there is a 50-50 chance right now that the Bank of Canada will cut interest rates for the third time in a year. More on this later in the week but if the BOC does cut rates again, then the expectation would mount for USD.CAD to test higher.
 

USD

The US Dollar is marginally weaker today against the major currencies with the exception being the commodity currencies that have been routed overnight and the US Dollar has soared, the price of oil dropped below the $30 a barrel price and all the commodity currencies were hit hard. USD/CAD was among the biggest gainers last night as the currency pair jumped over 150 points trading above 1.4500 at one point ($0.6897), With this type of move since the start of the year, I would now consider the Canadian Dollar in crisis mode. This will be the first real test for the new Liberal government. Given the stance that the Bank of Canada is almost singular focused on inflation, I doubt there will be any action on behalf of the Bank to stabilize the dollar.

CAD

Up today, we have a slew of US secondary data but unless we get a big surprise from the Retail Sales number USD/CAD will solely be focused on the oil price. We have no Major Canadian data out today, however I would like to mention one particular index we follow to measure the future direction of a currency pair, is the Speculative Sentiment Index (SSI). Very Simply it is a chart keeping track of the speculators in the markets that are either predicted the currency pair will rise or fall in relation to one another. Currently, there are three times more short (fall orders) on the Canadain loonie over the USD. This is surely assisting in the USD strengthen over CAD in relation to falling commodity prices.

GBP

GBPUSD was sold before the MPC announcement in hope of a 9-0 vote, but the market quickly bought Sterling after the vote was returned 8-1. Accompanying statements from the BOE included “The oil price drop means CPI pick up will be more gradual” and that “continued pound depreciation could lessen the drag on CPI” and didn’t change sentiment towards the Pound. GBPEUR was also soft in the morning after Reuters reported that “Many on the ECB Governing Council were skeptical about the need for further policy action in the near term.” After the ECB meeting, minutes were released and pointed to a more dovish approach from the ECB GBPEUR had a nice bounce.

Euro

The EUR was firm in the morning on hawkish ECB meeting minute expectations which were ultimately denied and saw the EUR decline when they were announced and it was quoted that “Some ECB members argued for more stimulus in December.” The moves didn’t take us out of the recent range against the USD. There are EUR 6 billion worth of option expiries between 1.0800 and 1.0900 suggesting more range trading for EURUSD today unless the US data is exceptional. We have the meetings of the Eurozone Finance Ministers today. On the agenda will be the progress of Greece in adopting reforms agreed by the Troika, pensions included. Greece only has 1.38 workers for every pensioner (UK has 2.75 workers for every pensioner) and only 36% of Greeks between the ages of 55 and 64 are working. Debt is 180% of GDP and 60k Greek firms have moved to Bulgaria since June 2015, there is still much work to do to.

USD
The US Dollar is marginally weaker this morning most likely due a positive performance last night for the Chinese Stock Market (which was higher by 2%) and a terrorist attack in Indonesia that left seven people dead including a Canadian. European equity markets could not extend the gain, and they were all lower overnight, yesterday I was hopeful that North American markets could have a positive day, but that changed pretty quickly and both the Dow Jones and TSX were down significantly. Both are showing positive signs of the opening today, but I will not be surprised if the rout continues.

CAD
The rout of the Loonie continued yesterday as USD.CAD jumped another 100 points on the oil price decline, since the start of the week USD.CAD has jumped almost 300 points all of it due to weaker oil price. Since the turn of the year USD.CAD is higher by almost 600 points that are too far, too fast. I guess there will be no relief in sight for US Dollars buyers anytime soon. It won’t be much comfort now, but I do think the Loonie will start to do better in the 2nd half of the year when the oil price shock has worked its way through the economy, but that is a long-time off. There is much more pain for US Dollar buyers over the next few weeks.

GBP
In the UK, the Bank of England voted 8-1 to keep interest rates (0.5%) and their stimulus program at current levels, GBP.USD did jump a bit on the news as the lone dissenter voiced his opinion that low rates will lead to higher than anticipated inflation in the common months.

Euro
Eurozone industrial production was a disappointing -0.7% MoM and worse than the expected -0.2%. However, the market couldn’t break out of its recent range and the Euro drifted for the rest of the day. The EUR is happy to tread water at the moment seeming to gain support from its large trade surplus.

Oil
All markets are still focused on the oil price at the moment and yesterday saw the price action take another run at the $30 a barrel level as the oil and gas inventories numbers both reported significant gains. Oil will remain volatile over the next few weeks and at the moment it does still look like the momentum will take the price lower.

USD

The US Dollar is stronger this morning as positive overnight data from the Chinese economy pushed equity markets higher and gave some stability to the Greenback. Chinese exports on a year-over –year basis rose 2.3% in December rebounding from a decline of 7.3% in November, this is an encouraging report from an economy that had been dragging down the global economy since the turn of the year. It will be very interesting to see if they can keep that momentum going forward.

CAD

The Canadian Dollar is stronger this morning off of it lowest levels from yesterday. USD/CAD did have a quick look at the $0.70 cent level but was not able to break through on its first try.  This move yesterday was in response to a big drop in the oil price however oil could not sustain a break below the $30 a barrel price so both instruments could not break through psychological barriers on the first attempt, I am sure they will take another crack at them soon. With North American stock markets finally poised to have a positive day we should see USD/CAD fall back a little but be prepared for a quick reversal of that if we see oil start to drop again.

Some secondary US data due out today including the Beige Book economic report but, for the most part, USD.CAD will continue to follow the oil price and the equity markets. I would expect markets to calm down a bit today; it has been a very rocky road to 2016 so far but they are still very nervous, and anything can happen. US Dollar buyers still should be ready with your orders as any pullbacks in USD.CAD will still be short-lived

In Market News

Corus Entertainment acquires Shaw Media for $2.65-billion.

USD
The US Dollar is marginally stronger this morning as the Greenback continues to surge on investor worries about the Chinese economy and significant drops in both the equity and commodity markets. Overnight oil fell to a new 12-year low as it traded below $31 dollars a barrel, since the start of the year the oil price is down almost 20% as the global over-supply is just pulling down all the commodity and equity markets. This trend will continue over the short-term if the Chinese economy that is the largest consumer of oil behind the US continues to flounder.

CAD
The Canadian Dollar had a quiet overnight session after a very volatile day yesterday.After opening the day much weaker yesterday USD.CAD spent the day moving back higher in response to the big drop in the oil price, the currency pair continues to move towards the psychological level of .7000 cents (1.4285) and most likely will hit that level at some point this week. I would anticipate that USD.CAD will have a tough time breaking through that level on the first few attempts, but that view may be flawed if we continue to see the oil prices and equity markets drop like they have been over recent weeks.

GBP
In the UK disappointing manufacturing numbers pushed GBP.USD to new five-year lows and now trades at 1.4420, this nose dive for the Pound and poor performance of the UK economy will most likely force the Bank of England to keep interest rates low for longer than they had previously anticipated.
 
Oil
An interesting note about the oil price, most Canadian Governments are using an oil price of between $50 to $60 to create their budgets for this year, it now looks like those numbers are far-fetched. If oil stays around the $30 a barrel price for any significant time this year, then Canadians are going to be in for much bigger deficits than previously reported, and a lot of credit rating agencies will start to revise out bond ratings.

Nothing on the North American economic calendar today so once again we will keep an eye on the oil price and the stock markets to get a sense of what is going on with the currency.

USD

The US Dollar is stronger this morning as yet again intervention by the Chinese Central Bank to support their equity markets have given some overnight strength to the Greenback. The US Dollar is also benefitting from the strong Jobs Report on Friday where job creation in the US economy is continuing at an accelerating pace. In December, the US created $292K new jobs (expected 200K) and the November number was revised upwards to $252K, continued robust job growth will help the Fed with their plan to increase interest rates.

CAD

The Canadian Dollar starts the week off on a positive note as it has rallied from it close on Friday, USD.CAD is some 80 pips lower than we left it. This move is somewhat surprising to me as oil dropped around 2% on the Chinese situation, I would have thought that USD.CAD would have opened higher. Given the lack of follow through recently for the Loonie, US Dollar buyers may want to leave some orders at current levels and try and pick some up.

GBP

The market was relieved not to have to price in more volatility from China although Sterling was still soft after the November trade deficit at £3.17 billion was larger than the expected £2.7 billion. It was interesting to note that the UK’s trade deficit with the EU reached a record of £8.2 billion underlining the fact that the UK buys more goods from the EU at the moment. After the excellent US Nonfarm payroll number was released, GBP fell against the USD and EUR accelerating the decline in late New York time. The market will again look at the early volatility in China for direction before the release of Industrial production tomorrow and the BOE MPC meeting on Thursday.

Euro

German and French Industrial production were both disappointing at -0.3% MoM and -0.9% MoM. This put some pressure on the Euro which fell again after the US NFP data was released but it managed to recover nicely on the back of GBPEUR sales and a realisation that equity volatility means that the Fed will not be in a rush to raise US rates. The EUR has remained in recent ranges as investors who borrowed EUR (which has ultra-low interest rates) and then sold them for USD to buy US shares have now sold their US shares and hence buy back the EUR. This is a short term effect but does keep the EUR stable at the moment. In the background, the EU has another crisis brewing in the form of its migrant policy and because of this the German Chancellor Merkel has cancelled her plans to attend the Davos summit later this month.

USD
The US Dollar is marginally stronger this morning as the Chinese equity markets have calmed down thanks to intervention once again from the Chinese Government. The Government also announced that they suspend the policy of shutting down the market when losses hit 7% as it failed to reduce volatility as expected. Going forward investors will remain cautious of China, the Central Bank is expected to keep the program of devaluing the Yuan to make exports cheaper and to compete with other Asian countries.

CAD
Yesterday saw the Loonie stage a good sized rally after Bank of Canada Governor Stephen Poloz basically stated that he was not surprised that the Canadian Dollar was trading so weak, he emphasized that it will take some time for our economy to move away from a resource based economy to a more traditional manufacturing one. He also stated that he will continue to run an independent monetary policy course for Canada and will not match US interest rate hikes until they are warranted in Canada, such a policy will also put continued pressure on the Canadian Dollar. I see nothing here in his comments that would lead me to believe that we will see the Loonie regain any significant strength anytime soon.

We have a busy day on the economic calendar with the release of both the US and Canadian Jobs report. The US is expected to have created over 200k jobs again so that economy is ticking along and should provide fuel for the Fed to consider further interest rate hikes. In Canada the picture is not as bright as we are expecting to have created some 5,000 jobs and an unemployment rate still above 7%, given the recent market uncertainty and the fact that bank economists cannot even come close to figuring out this number we could see enhanced volatility around the release.

Euro

The Euro didn’t have any first tier economic data or comments for release and as such was pushed around by the rest of the market. The EUR made good ground against the Pound although GBPEUR is now nearing last year’s lows so may well hold at these levels for a short time before deciding its next direction. EURAUD was especially volatile firstly gaining 2.5% and then losing 1% overnight as China stabilised. The market waits for US jobs data Friday afternoon.

USD

The US Dollar has hit new year highs as international investors specifically from China move to a more secure market. The news is dominating the global markets this morning is another massive drop in the Chinese equity market is pushing global equities much lower and eroding confidence in the global economy. Overnight the Shanghai index slid over 7% in the first 30 minutes of trading (triggering a shutdown of the exchange) and the Chinese Central Bank allowed the Yuan to depreciate 2% trying to make Chinese exports cheaper. There is a clear lack of confidence at the moment in the Chinese economy, and it is taking global stock markets down with it, in early trading the Dow Jones Industrial average is pointing down over 350 points, it will be another blood bath in North America today.

CAD

The Loonie is weak right across the board with both EURO.CAD and GBP.CAD much higher from the start of the New Year.

Today we have Canadian finance minister Poloz set to speak about the Canadian economy, we should expect some further guidance, and I’m sure he will lead will falling commodity prices as the main driver in the loonie’s decline.

Euro

In Europe the Euro was able to extend some gains on the back of the employment rate falling to its lowest level in more than four years, declining for the third straight month. I think currency traders were also buying the Euro against Sterling as EURO.GBP is higher and GBP.USD is much lower.

USD

The US dollar broke through and were continuing to stay above the key level of 1.40 or 0.71. This could signal further gains for the USD over the loonie we will have to see what today news has in store for further guidance. Geopolitical tensions continue to contribute to the overall strength in the US Dollar. On the weekend it was the moves by Saudi Arabia that pushed the dollar higher and last night it was North Korea setting off a nuclear test device and claiming that is was a Hydrogen bomb, there has not been any confirmation of this so far this morning.

We have a lot of US economic data due out today highlighted by the ADP Private Employment Report and the release of the minutes from that last Federal Reserve meeting. We also have the Canadian Merchandise Trade Balance for November, but I think current events will overshadow this, l look for another extremely volatile day on the currency and equity markets (Dow Jones is pointing down over 200 to start the day) unfortunately this is starting to become the norm. In China, we have also seen more intervention as they try and fend off a market pull back.

CAD

In Canada today we today we have “Business Newsmaker” of 2015 Stephen Poloz speaking about the Canadian economy. We could see so some further weakening of the loonie as Poloz has said before that he isn’t afraid of going to negative interest rates to help the Canadian economy recover. Although this sounds like good news for the long run, we will see the loonie loose in the short run.

GBP

The mornings release of UK Construction PMI was a positive 57.8 beating expectations of 56.1. Unfortunately, the focus is away from economic data and more on risk aversion at the moment hence the number was ignored, and GBPUSD was sold. Early reports from the retail sector indicate that they didn’t have a good Christmas, and this will not be positive news for the UK economy and Sterling when the data is released Jan 22nd. GBPEUR managed to push higher as the Eurozone CPI data was soft and it just managed to hold its gains in the afternoon even after the news that UK Government Ministers would be allowed to campaign as they wish when the EU referendum campaign starts. This news adds an extra element of risk regarding the Pound over the medium term. This morning sees the release of the most important PMI survey, the Services PMI and Sterling will take direction from this data before the release of the FOMC minutes later this evening.

Euro

The European Consumer Price Index numbers at +0.2% were below the expected +0.3% and the Euro struggled all day after this release. The question is what can the ECB do if a double dose of QE doesn’t work? AS ECB board member Praet worryingly said this morning the ECB has no plan “b”. The EUR also has services PMI for release this morning with the EUR being sold against the Yen in particular as the market prices in risk in China, Middle East and overnight North Korea conducting a nuclear test overnight.

USD

The US Dollar is marginally stronger this morning as the meltdown in the Chinese stock market continues to dominate the financial headlines. Overnight the Asian equity markets were again lower, but thanks to a massive intervention from the Chinese Central Bank the numbers were not as bad as they were on Monday. The bank put in some 20 Billion dollars’ worth of capital into the Shanghai market that is their largest intervention to date. The Euro also traded weaker on some downbeat inflation data; December inflation only rose 0.2%, and the markets were expecting slightly higher numbers. The possibility of deflation remains in the Euro-Zone economy that will add to the calls for the ECB to add more stimulus.

CAD

USD.CAD traded in a narrow range overnight and for the foreseeable future the Loonie does seem to be at the mercy of international markets, nothing is happening at home that looks like it will affect the Canadian Dollar (that may change with the December Jobs report on Friday). The Loonie has picked up a little ground against the Euro and Sterling, both of those rates are off their recent highs and may present a good buying opportunities for short term buyers if Euro and Sterling.

Nothing of note out today on the economic calendar, current trading will continue to be affected by the big drops in equities and any change in the oil price.

USD

The US dollar is down a bit this morning as investors wait for US data scheduled to come out later in the day. The key data we will be watching out of the US includes core durable goods, new home sales and the revised consumer sentiment survey out of the US. This is the last major news day before the holidays so we could see some movement.

CAD

For Canada, we do have core retail sales and GDP numbers, however, with all the US data out we might yet again get overshadowed. I believe the Loonie has found its highest point for the year so unfortunately for us buyers this might be the lowest lever to pick up the dollar at least till the New Year starts. That being said as temperatures dip, outside of Toronto where all month we’ve had t-shirt weather (I’m from North Bay originally), we see oil prices picking up. Oil is now trading around $36.77, and we could see that number jump today that may help the Lonnie not gain but maintain the same levels of the US dollar.

Happy Holidays.

USD

The US dollar is down in overnight trading, easing the gains we saw yesterday. Many are saying it is due in part to poor expectations over this morning’s US GDP Q/Q and Price index. Oil prices are up a bit possibly adding to a bit of CAD strength we have seen this morning. Speaking of oil LA may have the new largest oil spill, the issue is that it is invisible, unless you have an infrared camera, http://www.dailynews.com/general-news/20151219/two-months-in-porter-ranch-gas-leak-compared-to-bp-gulf-oil-spill This could also be a mover as we have recently seen natural gas prices shoot up in price.

CAD

Again no major news out for Canada leading to us relying on commodity prices and the US data to see if we can regain a bit of strength. We do have Core retail sales and CAD GDP numbers due out tomorrow, but this data could take a back seat to the amount of US data out tomorrow as investors analyse these numbers to gauge the next Fed interest hike.

GBP

Very quiet and soft after Brexit comments. The more this debate rumbles on, the more the Pound is susceptible to weakness.

Euro

Pushed higher despite the Spanish election showing producing no clear majority Gov’t, possibly because Eurozone confidence edged slightly higher. This is important as it is the first reading after the Paris atrocities.

USD
The US dollar is up again mainly due to its secure status over other nations currencies and continues to rally due in part to the Feds decision last week to increase interest rates. The Fed has stated that they continue to increase their lending rate in a gradual manner so long as the data can support the decision. It’s that time of the year again, and with the holiday season, even the big bankers are taking time off so although we don’t have much in terms or data coming out we could still see some swings in the market as bankers wish to meet their targets in thin markets.

CAD
The Loonie is continuing to lose ground as oil, and other commodities hit 11 years lows and now many economists and myself are expecting 1.40 + to be the new norm for a bit. There is a bit of good news as Canada's Core retail sales and GDP numbers are expected to be better than months previous that should allow us to see a brief market dip. A great opportunity to place a market order in just under 1.40.


GBP
With no data released on Friday the Pound drifted lower against the Dollar and Euro. The weekend press reported the lack of confidence in UK PM Cameron’s negotiations with the EU last week. Certainly, Cameron’s positive comments from his negotiations have been met with criticism even within his party. Some would be “Brexit” flag wavers are pointing to an EU that has a weakening European currency, stumbles from crisis to crisis in recent history and is increasingly deaf to British opinion. There are “guesstimates” that the Govt. may call the referendum in June or September next year after agreeing on a deal with the EU in February. Again, the most open debate and negative opinion we have regarding “Brexit” the more sterling will be under pressure. UK data this week includes current account data and final GDP on Wednesday.

Euro
The single currency was pushed around by option expiries and ultimately closed slightly higher on the day against the other major currencies. There aren’t any major economic releases for the Eurozone this week although the results of the Spanish election showing a change in direction from the triditional two-party system could cause some movement.

USD

The US Dollar, for the most part, is unchanged this morning in a very quiet overnight session; the only mover overnight was the Japanese Yen. In Japan, the Central Bank said they would keep their stimulus program at 80 trillion Yen per year, but they did say that they would start to buy more equity based products to try and generate more growth in the economy. The Euro and Sterling had quiet nights and continued to range trade.

CAD

The Lonnie is losing ground if we continue to see oil and commodity prices fall we could easily see us pass the 1.40 level today. Today we have CAD CPI and Whole numbers that aren’t expected to be much different from months past, so I don’t expect the loonie to strengthen today. There is some larger CAD news that might help increase the value, but that news will be coming out on Wednesday of next week. The only possible retreat I could see for the US dollar today is if FOMC member Lacker provides some negative insight into the next Fed interest rate decision.

GBP

UK retail sales were a Black Friday propelled +1.7% and much better than the expected +0.6%. GBPUSD managed to push higher before the number but fell back after the excellent data. Sterling struggled against the Dollar all afternoon despite poor US data and just about managed to hold its ground against the EUR. Large option expiries today in a thin market may prove to be the highlight of the day and watch out for headlines from the EU and UK PM Cameron in Brussels.

Euro

German IFO business sentiment missed expectations of 109.2 and came in at 108.7. Nothing of note came out of the ECB economic bulletin, and the EUR traded quietly in the afternoon losing ground against the dollar and holding steady against the Pound.

USD
The US Dollar opens up at a two-week high after the US Federal Reserve increased interest rates by 0.25% to 0.5%. In her statement, Fed Chair Janet Yellen did say that future rate hikes would be gradual and dependent on the data (exactly what I thought she would say) but we did not get the drop in the US dollar that I was looking for on those comments. The Greenback remains supported against most currencies and looks to continue to strengthen; I think some form of a pullback is inevitable, but it may be a long way off yet.

CAD
USD.CAD had an up and down afternoon yesterday but eventually settled in right where it was before the announcement, near 11-year highs for the currency pair. If the oil price does settle in at current levels, then I think it will be a bit difficult for USD.CAD to move much higher over the short-term but the currency pair should remain volatile over the year-end.

GBP
The market was still buying USD before the evening Fed announcement, and this kept the pressure on GBPUSD. The UK jobs data showed unemployment falling to the lowest rate in over 7 years but to counter this also showed a slowdown in wages in the last three months. This, of course, points to BOE Governor Carney saying that conditions are not right at the moment to follow the Fed and raise rates. GBPUSD pushed lower immediately after the US rate hike, but it bounced before Fed Chair Yellen’s press conference and then fell afterwards as the market priced in the “dots”, which indicate four possible rate rises next year. On a purely European note for the Pound German Chancellor Merkel said that she wants to avoid “Brexit” but won’t compromise core EU principles. With more Brexit talk weighing on the Pound, the latest Brexit poll showed 56% of those polled would vote to stay in the EU and 35% vote to leave. We will see more headlines on this as UK PM Cameron meets with the EU tonight.
 
Euro
Eurozone data was mixed with flash manufacturing PMI slightly better than expected but services slightly weaker. The Euro lost ground immediately after the rate hike and then also pushed higher before Fed Chair Yellen’s press conference only to fall back later as the market realised it has priced in only 2 US rate hikes, and the Fed is indicating four possible rate hikes. We have German IFO business climate data this morning and the ECB economic bulletin later. With the big December data point now over the market may well to look at Christmas turkey prices instead of FX.

USD
The US Dollar is marginally higher this morning as the markets get ready for the announcement from the US Federal Reserve on their latest interest rate policy. I have outlined the possible outcomes from today’s announcement below, but most market participants are agreed that we will have a US interest rate hike of 0.25% today; this will be the first interest rate hike in the US in over eight years (the last rate hike was June 2006).

Option 1- The Fed does not raise interest rates - Very low probability of this happening.

If the FED decided to kick the can even further besides losing market credibility, we could expect equities to soar, and the US Dollar will get hit hard, USD.CAD drops considerably in the short-term but will eventually move back higher.

Option 2-Fed raises a quarter point but indicates that future rate hikes are not imminent. (Market is 70% sure)
 
The US Dollar has had so much strengthening leading up to this moment. The US Dollar will lose some momentum today, and USD/CAD could fall back a fair bit on the day. Overall the Greenback momentum will be maintained but investors will start to look at the timing of future interest rate hikes, and if they are not until the middle of 2016, then the US Dollar will lose some strength in the short-term but recover in the long-term. US Dollar buyers need to be ready to take advantage of this type of move.
 
Option 3-Fed increases interest rates by 0.50%. - Very unlikely but still possible if the Fed thinks the economic data is very strong.
 
Such a move would crash stock markets and the US Dollar would soar, USD.CAD would jump over a hundred points higher on the day.

CAD
USD.CAD is marginally higher this morning but remains in its most recent range; the Loonie remains vulnerable to any movement in the US interest rate probably more so than most currencies given its current exposure to the oil market as well. Canada has recovered a little against the Euro and Sterling in the past few days, but it does remain near it the weakest point over the last week or so.

EUR
In overnight trading, the Euro was slightly weaker as the Euro-Zone inflation rate continues to come in well below the European Central Bank 2% target rate, if the rate stays this low for an extended period we may yet again see more stimulus measures from the ECB. In the UK, the unemployment rate fell to 5.2% (down from 5.3%) but Sterling could not translate that into any gains. Oil has settled into the $37-$35 trading range for the moment as the commodity markets also await news from the Federal Reserve, we do get the weekly US oil supply report this morning so that may bring back a little volatility and get the price moving.

USD
The US Dollar is marginally weaker this morning as the FX markets start to square up (traders reducing position size) ahead of the US Federal Reserve interest rate announcement tomorrow. In the overnight economic news, the German Economic Sentiment report produced a better than expected result, so we are starting to see some slightly encouraging data out of Europe, in the UK the annual rate of inflation rose 0.1% in November, which is higher than the -0.1% recorded in October. All in all none of these factors affected the currency market as it is almost solely focused on the US Fed at the moment. Up today, we get the last piece of major US data before tomorrow’s US Federal Reserve report in the form of the US inflation report for November.

CAD
In Canada, we have some manufacturing data due out for October, and the Bank of Canada is publishing its semi-annual Financial System review today. I am not expecting any great revelations but if they hammer home on the level of household debt in the country, we may see some foreign investors get spooked and start to sell the Canadian Dollar. BOC Gov Poloz is set to take the stage today just before lunch. We hope to hear more about his unconventional policies and if or how they would be implemented, we’ll  keep you posted.

Oil
Oil had a relatively quiet night trading between $36 and $37 a barrel (http://bloom.bg/1J90Hv9); we open in North America near the low end of the price range, if we drop below the $36 threshold look for the Canadian Dollar to start to trade weaker.

GBP
Started the morning soft and continued as MPC member Shafik commented that she wouldn’t vote for a rate hike until she was convinced that wage growth will be sustained at a level consistent with the inflation target. Combined with the Right Move House price index falling 1.1% and positive Eurozone Industrial production both GBPUSD and GBPEUR were pushed lower. Today sees the release of UK and US CPI so we may have reason to move although the main focus is on positioning before the FOMC announcement tomorrow.
 
Euro
Euro zone Industrial Production at +0.6% was better than expected +0.3% and when combined with ECB Presidents comments that ECB monetary policy is creating conditions for a structural recovery the EUR nudged higher. Draghi also said that the ECB would intensify stimulus if it has to but this comment was largely ignored by a market looking at commodities, bonds and emerging markets. We have German ZEW economic sentiment at 10:00 am which can give us direction. Be aware that the market is still holding a short EURUSD position and if the Fed does give a very dovish statement alongside a small 25 bps rate rise this could encourage EURUSD and EURGBP buying.

USD
The US dollar is continuing its climb surpassing another 12 months high against the loonie. We expect this climb to continue leading up to this Wednesdays FED interest rate announcement that many are saying will raise the interest rate 0.25. It’s hard to believe that such a small interest rate hike could drive down all other currencies in relation however I believe it speaks volumes. It’s not that the US is raising interest rates for the first time since the movie Avatar hit boxes offices, it’s that all other countries soon to possible include Canada are lowering their interest rates to zero of even a negative interest rate to spur growth. It will be interesting to see how this plays out in 2016 as such a move shows off your economic confidence.

CAD
Although the FED announcement is getting a lot of attention, we also see that OPEC announcements are having a devastating effect on the markets. Since the Dec 6th, OPEC statement we haven’t seen any pullback in the USD strengthening over the CAD, so as long as oil drops in price expect the CAD to fall. If you see a dip in the USD, buy more than you normally would as the dip will only last for a brief period.
Oil is currently trading at $35.

Euro
ECB Executive Board member Coeure commented that Euro area deflation was now off the table, and fellow Board member Mersch then added that a very large majority of ECB policymakers did not want more QE. Both comments helped underpin the Euro for the day. ECB President Draghi speaks this morning at a conference, and we have the ECB economic bulletin on Thursday for further direction.

USD

The US Dollar, for the most part, is unchanged this morning with the exception being against the commodity currencies where the US Dollar continues to pick up strength due to the drop in the price of oil. The Greenback was fairly quiet against the other major currency pairs as it is still supported at the moment by the expectation of an interest rate hike next week. With US stocks in New York already pointing down triple digits, the dollar should remain supported again today.

Oil hit a new seven years low overnight as a report came out detailing the global oversupply will remain in place until the 4th quarter of 2017, and OPEC stated they pumped more oil out of the ground last moth than at any time in the past three years. Every once in a while Canadian Dollar trader has to become an oil trader as well, and this is one of those times, I think it is getting a bit overdone now, but the Loonie continues to track any movement of oil and is ignoring any economic fundamentals.

CAD

Another multi-year high for USD.CAD last night and right now there does not seem to be anything to stop the Loonie from weakening, I thought yesterday that oil might stabilize and the Loonie might recover a bit but if oil keeps dropping in the short-term this is going to get much uglier over the next few weeks, I don’t want to think about what we will be paying for fruits and vegetables this winter! With Euro and Sterling relatively stable overnight the Loonie also set new recent lows against those currencies, both EURO.CAD and GBP.CAD are higher this morning.

Up today we get US Retail Sales for November and some other US secondary data, unless the number is wildly different from expectation I am not sure that it will have much effect on the market, today’s conversation will still be dominated by the oil and equity markets.

USD
The US Dollar is marginally stronger this morning, but overall currency and oil markets seem to be calming down after last week’s event. The Greenback remains supported by the expectation that the Fed will increase interest rates next week, and the Euro also remains somewhat supported on the disappointing stimulus measures announced last week by the ECB.
 
CAD
A quiet night for USD.CAD as it settles into its new trading range, we will really have to watch the key indicator number out Friday and earlier this week as it will provide guidance on the FED interstate decision next week. The Loonie remains weak both against the Euro and Sterling, unless we get a significant drop in the Euro, EURO.CAD should remain at current levels ahead of the turn of the year.
 
GBP
Sterling is falling back a little this morning as the Bank of England announced that they are holding interest rates at current levels and not making any changes to their stimulus program. At one point earlier this year, the BOE was expected to be the next Central Bank to increase interest rates but I think this as fallen by the wayside for now. The UK market will look for the minutes of today’s meeting (released later in the month) to get a sense of what the BOE is thinking.

USD

The US Dollar is marginally weaker this morning as the price of oil recovered a little during the night, currency traders have also sold some US holdings and were seen taking some profit from being long the Greenback over the last few days. Nothing to really report from the overnight markets, stocks were a little lower last night but not as much as the previous evenings, WTI oil moved back above $38 in trading but it may get volatile again today as we get the weekly US inventory report, if supply starts to grow in the US that will drive down the price and hit the Canadian Dollar again.

CAD

The Commodity currencies (CAD, AUD and NZD) all recovered a bit last night as the oil price rebounded and there was higher than expected inflation data our of China. Right now USD.CAD is just mirroring any changes in the oil price and most likely will continue to do that over the next week until we hear from the Federal Reserve on interest rates. For the most part, I think this move is a bit overdone, Poloz’s comments that negative interests in Canada could be used to help the economy did not help the Loonie at all, but I would like to see a bit of a pullback towards 1.3400 again before we get any move towards 1.3800. I am not 100% convinced that will happen, but we shall see over the next few days.

The Just US and Canadian secondary data on the economic calendar are so the currency markets will focus entirely on the equity markets and the price of oil. US Dollar sellers should take advantage of these levels; it is never wrong to take a profit off the table. US Dollar buyers should leave some orders close to 1.3500 to take advantage of any possible pullbacks on any intra-day moves.

USD

The Us Dollar is mixed this morning as it is stronger against the Canadian Dollar and the Pound but marginally weaker against the Euro. Equity markets took a hit overnight as the Chinese economy reported that exports fell for the 5th straight month, this will be a worry for global growth but should provide some momentum to the US Dollar. Sterling was lower overnight as the UK reported poorer than expected manufacturing data, the UK still shows very little sign of growth at the moment, GBP.USD fell to levels last seen in the spring of this year.


CAD
The Canadian Dollar remains under massive pressure this morning as the rout in the price of oil continues to weigh on many segments of our economy. Yesterday saw the TSX drop over 300 points led lower by energy and financial stocks and the Canadian Dollar continues to weaken. More of the same this morning, USD.CAD looks like it going higher as we start the day and stocks are pointing to another sell-off, the Loonie continues to lose ground to both the Euro and Sterling as weakness in those currencies cannot make up for the weakness in the Loonie.

Later today we have BOC Poloz speaking on “The Evolution of Unconventional Monetary Policy” and given his proactive take charge leadership we could see new policy’s being put in place to curb the loonie decline.

GBP
No data released yesterday, so the Pound drifted against both the Dollar and the Euro. Overnight the UK November British Retail Consortium retail like for like sales were -0.4% and the weakest since 2011. We have Industrial Production and Manufacturing Production today plus the GDP estimate in the afternoon. The market is treading water at the moment waiting for the Old Lady on Thursday.
 
Euro
German Industrial output is not widely watched and as such when it came in at +0.2% and lower than the expected +0.7% the Euro was accordingly sold. Draghi's comments that there were “no limits” to future ECB stimulus measures were often reported and helped to keep the Euro soft. We may get some movement from revised Eurozone GDP released today at 10:00 am but the market is easing its way into the week.

USD

The US Dollar is stronger this morning as the currency markets digest the disappointing ECB announcement on Thursday, another strong US jobs performance and the lack of any significant announcement from the OPEC meeting on Friday. After dropping nearly 4% on Thursday after the ECB announcement the Greenback is back on a tear as EURO.USD dropped 100 pips to start the new trading week, the strong US jobs report from Friday (+211K new jobs, the unemployment rate of 5%) has all but convinced the market that the Federal Reserve will increase interest rates this month. Also on Friday ECB Governor Draghi made the comment that the ECB would step up stimulus measures if necessary but given that his credibility has taken a hit I am not sure how much stock the markets will put into his comments.

CAD

With the overnight strength in the US Dollar, USD.CAD has moved a lot higher this morning. Without OPEC making a clear announcement on oil production targets the price of oil has taken a hit and dropped below $40 a barrel, this is hurting the Loonie and giving USD.CAD more room to move higher and break the top end of our recent range. After the big move on Thursday, the Loonie still is at its weakest levels against the Euro and Sterling, even though EURO.USD fell overnight the Loonie was not able to pick up any real gains against the common currency; the Loonie was just too weak against the US Dollar to make any gains against other currencies. Look for the Loonie to remain weak as long as oil struggles to get back above $40.

It is a quieter week on the economic front that is headlined by US Retail Sales on Friday and Canadian Wholesale trade on Wednesday; I look for USD.CAD to now establish a new range above the 1.3400 level, and we should stay that way as long as the oil price does not rebound.

USD

The US Dollar is marginally stronger this morning after it was crushed yesterday due to the European Central Banking disappointing the markets with the less than inspiring stimulus package. For weeks before the announcement yesterday ECB officials had been dropping hints about how they would do what is necessary to turn around the EU economy. Yesterday’s drop in the deposit rate and extending the stimulus program into 2017 hardly counts as taking stronger measures. Overnight EURO.USD held steady at current levels; currency markets now will look to the US employment report to get a sense of direction for the Greenback.

Nothing out of the OPEC meeting as of yet, as I mentioned yesterday, there is no set time for an announcement or any guarantee of an announcement but if they do make a change in production levels then we will see the currency markets get quite active.

CAD

USD.CAD has been ignoring all this action in Europe for the moment and still trades in the same range for the past few weeks, I do get sense that this might change today. The same can’t be sent for EURO.CAD as it too was crushed by the strong Euro yesterday, the cross currency pair is some 500 points higher than it was at this time yesterday. By all accounts, that is a massive move that rarely happens in such a short time frame.

In addition to the possible OPEC announcement we get some secondary data out of Canada followed closely after by the Employment reports for the US and Canada. In the States we are looking for another month of over 200k new jobs to have been created, this will be the last major piece of data that the Federal Reserve will look at before making their decision on interest rates later this month. In my opinion, only a real negative number (which would be a total surprise) would give the Fed any reason to hold off on hiking interest rates. In Canada, we are expecting to lose around 10k jobs but again as we have seen in the past, the bank economists rarely get this number correct. A lot of the drop in the Canadian number will be the reduction in the temporary election workers coming off the payroll so I am not sure just how significant this Canadian number will be. If we get a strong US report, then I look for USD.CAD to test higher throughout the day.

NEWS ALERT:
*400+ point move in EUR/CAD.
This morning news was published prematurely saying the ECB would leave interest rates unchanged when in fact they did decide to lower the interest rates. https://twitter.com/ft

USD
The US Dollar is marginally stronger this morning as the financial markets await word from the European Central Bank on their interest rate and stimulus programs. The US Dollar remains strong as yesterday Federal Reserve Chair Janet Yellen said the Fed remains on track to increase interest rates this month. We are starting to see a divergence between Europe (cutting rates and increasing stimulus) and the USA who are starting a program of increasing interest rates. Sterling is a little higher this morning (after trading weaker yesterday) as it received some positive economic news, the Pound should also benefit from a weak Euro if the ECB increases their stimulus program today.
 
CAD
USD.CAD is marginally lower to start the day but the big move for the Loonie yesterday and last night was against the Euro and Sterling which are both lower this morning, if you need to buy some of these currencies pairs I would suggest taking a little money off the table and then wait and see what happens with the ECB to plan a future strategy.
 
Yesterday we saw an interesting development over a quick two minutes period that highlights just how sensitive the Canadian Dollar can be to the oil price. Over the news wires, a quote attributed to the Iranian oil minister came out saying Iran favored a cut to the production, on this news hitting the wires USD.CAD dropped 50 points in about a minute. After this move, another quote surfaced that this was not, in fact, true and USD.CAD quickly moved back higher. If in fact we get some kind of announcement tomorrow from OPEC that they are cutting oil production look for USD.CAD to have a quick and violent move, not something I would hang my hat on but something to consider.
 

USD

The US Dollar is marginally stronger this morning as both EURO.USD and GBP.USD have dropped from their overnight highs. The Greenback continues to remain supported in the expectation of a US Federal Reserve interest rate hike, yesterday it did trade a bit weaker on some poorer than expected secondary data, but overall the sentiment for a strong US Dollar remains in place. This morning saw the Euro-Zone inflation come in slightly below expectation (0.1% increase last month), the EU inflation rate has been below 1% for a considerable period now, and the ECB target for inflation is at 2%, so the lack of inflation in the EU economy is still a concern.

CAD

Nothing new to report for USD.CAD, it is stuck in a very tight range, but we do open this morning at the top end of that recent range. Yesterday saw the Canadian GDP report come in, and while the September number was less than expected (-0.5%) the overall year on year growth rate hit 2.3% in the third quarter taking us out of recession, this was slight below expectation as well. USD.CAD rose about 50 points on the news, but the Loonie recovered during the afternoon session staying within the recent range. The good news in the report is the weak Canadian Dollar is having a positive effect on exports showing a 2.7% increase in the quarter; it will be interesting if the weak September number will continue into the 4th quarter.

More secondary data out of the US today, but trading will be highlighted by the Bank of Canada announcement this morning at 10:00 am. We are not expecting any policy changes today so everything will depend on their statement, if they hint at a future interest rate cut to offset the decline in growth in September then look for USD.CAD to jump sharply.

USD

The US Dollar is marginally weaker this morning in another quiet overnight trading sessions. The Dollar was a bit weaker on poorer than expected manufacturing data coming out of China, so investors are still a bit worried about the economy there and its effect on the global market. In Europe, the Unemployment rate came in slightly better than expected at 10.7%, with the ECB expected to announce more stimulus measures this week the Euro was not able to extend any real gains on the positive number. In the UK Sterling is off slightly from its overnight highs, the Pound benefitted from the announcement that all seven major UK banks passed stress tests on their balance sheets, and no new round of capital regulation would be required.

CAD

Again nothing much to report on the USD.CAD front. The currency pair continues to range trade in narrow bands, hopefully with lots of Canadian data out this week we will see that start to change, and we will get some movement. Both GBP.CAD and EURO.CAD continue to trade in a familiar range as well if we can get USD.CAD moving then we will see some of that spill over into the cross currencies.

We get some US secondary data today but USD.CAD will get its direction from the third quarter Canadian GDP report where we are expecting a yearly annualized growth rate of 0.4%. A number that “officially” gets the economy out of recession, over the quarter the annualized rate would be between 2.0% and 2.5% so a marked improvement over the last quarter’s results. I will be interested to see what the Bank of Canada has to say tomorrow about future growth and how the weak oil price will continue to affect the economy.

GBP

A hangover from the weekend’s comments by MPC member Vileghe pushed Cable briefly through support but it later bounced as there was little follow through and GBPEUR had month end buying. UK mortgage approvals were as expected at 70k and the second tier US data when released was disappointing so the Pound squeezed higher against the Dollar and Euro. We have just had the release of the bank stress tests this morning and all of the banks passed the minimum requirements. However, the Bank of England has signalled that it will soon want British banks to hold up to £10 billion more capital in the form of a “countercyclical capital buffer” (money in reserve for a rainy day). These higher capital market requirements could well be seen as bearish for the Pound as they will imply less need to raise UK interest rates. Manufacturing PMI will also be released at 09:30 am.

Euro

Italian CPI MoM although not the most important data release was -0.4% and worse than expected -0.2%. The market has little reason to buy Euros before the ECB meeting this Thursday and as the day wore on it gradually slipped against its peers. The World’s leaders were at the Global Climate meeting yesterday and there is a lack of European data today. 

USD

The US Dollar remains strong as we end November and get ready for what will be a busy December on the economic news front. The sentiment for a strong US dollar and weak Euro should continue to remain in place as we wait to hear from the US Federal Reserve and the European Central Bank on interest rate policy. In the overnight news, the Euro was a little weaker as the German Retail Sales report for October fell 0.4% compared with the expectation of a 0.4% increase, another sign that the ECB should increase their stimulus package as Germany goes so goes Europe.

CAD

The Canadian Dollar opens close to where we left it on Friday, USD.CAD did trade a little higher overnight, but trading should remain subdued over the short term. The Loonie is holding on to its gains against the Euro at the moment and with projected weakness for the Euro we may see further gains for the Loonie against the Euro.

A busy week on the economic data, a quiet day today to close off the month and then things ramp up for December with CAD GDP, a Bank of Canada policy announcement and it is all topped off by both US and Canadian Employment reports on Friday. In between all this there is loads of US secondary data, it will be a busy and volatile week so make sure you have your orders in early.

USD

The US Dollar is stronger this morning but still trades in thin market conditions as most US banks, and hedge funds will be operating with a skeleton staff today. The Greenback continues to set new multi-month highs against the Euro, the prospect of interest rate hikes in the US and further stimulus measures in Europe continue to push EURO.USD is lower. The only significant piece of economic news overnight was that the UK GDP report for the third quarter that rose 0.5% in-line with the market's expectation. The Pound did not receive any benefit from this report as it along with the Euro traded weaker during the overnight session.

CAD

The Loonie is weaker to start the day, USD.CAD had drifted lower over the course of the afternoon yesterday, but all the gains that the Loonie had made have been given back this morning and USD.CAD continues to trade in tight ranges with no imminent breakout seen on either side of the market. EURO.CAD continue to trade at the low end of its recent range but with weakness in both the Euro and Canada it will be difficult for the Loonie to make any significant gains against the Euro in the short-term. If the ECB announces a massive increase in their stimulus program next week then perhaps we can see EURO.CAD trade lower.

Nothing of note on the calendar today so look for USD.CAD to have a quiet day.

GBP

Initially soft but with the US holiday generally quiet. What news there was came from a poll in the Evening Standard, which indicated that 58% of the British public think the British economy would be either better off or no worse off if Britain were to quit the EU. Nationwide House Price index this morning was +0.1%, lower than the expected 0.5%. The budget will probably slow the housing market further as buy to let and second homes have an additional 3% stamp duty to pay. GDP estimate data may give us short term impetus this morning.

Euro

Quiet and range bound with the US on holiday. Understandably French consumer spending fell 0.7% MoM and we have European economic sentiment this morning.

USD

As you would expect the US Dollar is unchanged this morning in very quiet overnight trading, currency markets remain subdued with the lack of trading activity coming out of the US, markets should remain that way until Monday when the New York banks are back at full staff. Yesterday saw more positive news come out of the US with new home sales up 10.7% in October, the expectation was for a 6.0% increase so once again the US economy continues to move forward and the probability of an interest rate hike in December grows.

CAD

Nothing to report from USD.CAD, the currency pair continues to range trade in narrow bands. One of two things will happen today and I have seen both scenarios many times in the last 35 years, first scenario is that as expected we have a quiet trading day and the Loonie does not move that much, this is normal given the lack of trading activity out of the US. The second scenario is much more fun and involves some large hedge fund or corporate trader coming to the market to take advantage of the lack of liquidity and start to move the market a significant amount, in the remote chance that this second scenario unfolds make sure you have orders in, I have seen crazy things happen to the Canadian Dollar on US holidays.

GBP

After Tuesday’s sell off the Pound stepped out of the limelight while the Euro took its turn on stage. Cable was initially dragged lower by the Euro before running in to profit taking buyers after the US figures were pretty much as expected. Throughout the day the main theme was Euro weakness with one eye on the Budget but apart from a U turn by the Chancellor on working people’s tax credits and putting a 3% stamp duty on buy to let and second properties there wasn’t anything for the FX markets to follow. Today is a US holiday and followed by “Black Friday” the shoppers heaven. We may well get quiet markets.

Euro

Started quietly but when a Reuters report was released saying that the ECB is now considering broader bond buying and two tiered charges for bank deposits (the banks have to pay interest to keep funds on deposit) being introduced at their December meeting the Euro took a real tumble and lost over 1% at its lowest. ECB’s Constancio added that recent developments had made the inflation goal hard to reach and added to the general negative Euro sentiment. In the face of probable Euro easing the SNB’s Jordan has been vocal saying that the Swiss Franc remains significantly overvalued and that negative interest rates have proved very successful in reducing the Franc’s appeal.

USD

The US Dollar rose to eight-month highs, the Greenback remained supported yesterday as the 3rd quarter GDP report came in as expected with a growth rate of 2.1%. The US Federal Reserve will be comfortable with this growth rate and will use it as ammunition for the argument supporting an interest rate hike next month.

CAD

More of the same for USD.CAD at the moment, another very quiet night for the currency pair and we continue to range trade in familiar territory. With overnight weakness in the Euro, the Loonie was able to extend more gains against the common currency and EURO.CAD is as low as it has been in the past five months. Given all that is going on in Europe, it might not be a bad idea to lock up some (not all) forwards at these levels to protect a move back towards 1.4500 and higher.

Lots of US economic data ahead of the holiday tomorrow. Included are US Durable Goods, Personal Income and Expenditures and Consumer Sentiment for November. We could see some enhanced volatility after these releases, but the market will them start to shut down around noon as Americans hit the road for the holiday. A quick reminder that we will be in the office tomorrow and able to book transactions but we will not be able to send any wire payments.

To all our American readers have a safe and happy Thanksgiving holiday.

USD

A very quiet overnight session for the US Dollar, most currency levels are just about the same as where they closed yesterday. The Euro received a little support during the session as a business climate report came in a little better than expected, perhaps the business community is responding positively to the ECB’s attempts to support the Euro-Zone economy.

In Geo-Political news, the Turkish Air Force shot down a Russian aircraft claiming that it ignored repeated warnings it was flying into Turkish airspace. The Russian have countered claimed that they can prove the plane was over Syria, the Russian reaction to this incident will be significant and if they decide to retaliate it could escalate the whole region. As a NATO member, other NATO countries may be required to come to the aid of Turkey but hopefully it will not get that far, keep in mind if the situation worsens we could see a significant flight of investor assets to safer countries and a big boost for the US Dollar.

CAD

Nothing solid for USD.CAD last night, the currency pair continues to trade near recent highs with no sign of significant strength for the Loonie in the short-term. The Loonie continues to trade near its stronger levels of the year against the Euro and could pick up some more gains against the Euro if it stabilizes against the US Dollar and the Euro continues to weaken.

Up today, we get the US Third Quarter GDP report where we are expecting an annualized growth rate of 2.1%, given that the recent growth data out of the US. I would be surprised if this number disappoints, a poor showing could hit the US Dollar hard as that would call into question the Federal Reserve interest rate hike next month. The risk to US Dollar buyers is a strong report that will push USD.CAD a lot higher, a weak report will push USD.CAD lower on the day, but I would not expect a huge move.

USD

The US Dollar starts another week on a positive note as the expectation of a US Federal Reserve interest announcement gets closer, on Friday one of the committee members stated that there is a strong case for an interest rate hike as long as the fundamentals stay strong. Overnight the US Dollar index hit a fresh seven-month highs and at the moment it looks like the Greenback will carry this momentum through to the December meeting.

Overnight the Euro was weaker despite a slightly stronger than expected manufacturing report, the Euro is still weighed down by comments earlier in the week that the ECB stands ready to increase their stimulus package to boost the Euro-Zone economy at their next meeting.

CAD

The Canadian Dollar had an active overnight session, USD.CAD initially weakened off in the early hours of the morning on the back of the stronger US Dollar but comments out of Saudi Arabia this morning stating that they will work with other OPEC nations to stabilize the price of oil have given the Loonie a big boost, and we are almost back to where we closed on Friday. I guess the Saudi plan of hammering the price of oil has not worked out so well for them, and they are now reversing course, it remains to be seen what action they will take at the next meeting of OPEC (early December) but if they, in fact, push the price of oil higher by cutting supply the Canadian Dollar and other commodity currencies should receive a more medium-term benefit, for the short-term the US Dollar will still dictate where USD.CAD is going.

Ahead of the US Thanksgiving holiday this week we get a slew of US Secondary economic data that will bring some volatility to the market, things should quiet down on Wednesday afternoon as the US closes up shop for the holiday. Just a reminder that while we will be in the office with the US Fed wire system closed we will not be able to affect any wires on that day so if you need to do something be aware of that timeline. There is nothing of note on the Canadian economic calendar this week so the US Dollar will again dominate the Loonie.

USD
The US Dollar is again weaker this morning as investors continue to take profit on their long US Dollar positions. Yesterday the highlights of the Federal Reserve minutes included;

- US Fed members wanted to convey that a December “liftoff” may be appropriate barring any economic shocks

- Members agreed on a gradual increasing of interest rates when they do start to increase

-Some members concerned that the change in wording too strong for a December signal

Overall I think the minutes still lean more towards an interest rate hike in December which should keep the overall strong US dollar momentum in place. In other Central Bank news overnight the Bank of Japan kept its stimulus program at current levels, it was widely thought that they would increase their program because the country was again in recession.

CAD
The Canadian Dollar was stronger by almost half a percent overnight as USD.CAD dropped the most it has in a while. There is nothing fundamentally happening that I can see to have reversed the current trend so as mentioned above this may be nothing more than profit taking, if I were a US Dollar buyer I would look to pick up some US Dollars at current levels and take advantage of this move. The Loonie also made some small gains against the Euro but has given some of that back this morning on overall Euro strength.

Up today we get some secondary data out of the US including the Leading Indicators report for October, overall I would not expect much volatility from these reports but if they are even slightly negative we may see USD.CAD drop further.

 

The US Dollar is again weaker this morning as investors continue to take profit on their long US Dollar positions. Yesterday the highlights of the Federal Reserve minutes included;

- US Fed members wanted to convey that a December “liftoff” may be appropriate barring any economic shocks

- Members agreed on a gradual increasing of interest rates when they do start to increase

-Some members concerned that the change in wording too strong for a December signal

Overall I think the minutes still lean more towards an interest rate hike in December which should keep the overall strong US dollar momentum in place. In other Central Bank news overnight the Bank of Japan kept its stimulus program at current levels, it was widely thought that they would increase their program because the country was again in recession.

The Canadian Dollar was stronger by almost half a percent overnight as USD.CAD dropped the most it has in a while. There is nothing fundamentally happening that I can see to have reversed the current trend so as mentioned above this may be nothing more than profit taking, if I were a US Dollar buyer I would look to pick up some US Dollars at current levels and take advantage of this move. The Loonie also made some small gains against the Euro but has given some of that back this morning on overall Euro strength.

Up today we get some secondary data out of the US including the Leading Indicators report for October, overall I would not expect much volatility from these reports but if they are even slightly negative we may see USD.CAD drop further.

 

USD

The US Dollar is slipped lower this morning in quiet overnight trading ranges, most likely on the back of some profit taking by currency speculators ahead of today’s release of the minutes of the last Fed meeting. Yesterday’s US inflation data was right on target so inflation should not be a concern when the Federal Reserve looks at the data in December. Instead, they will be focused on employment and growth data before making their decision on interest rates. Overnight saw further Geo-Political events with a bomb scare at a football match in Germany, two bomb scares on Air France flights and a raid on an apartment in France which reportedly prevented another attack in Paris, this situation should continue to lend support to the US Dollar on the safe-haven effect over the next few months.

CAD

Again another very quiet night for USD.CAD as it continues to range trade looking for a sense of direction, the currency pair remains near the recent highs with nothing positive on the horizon to give the Loonie any sustained strength. In the news overnight CP Rail announced an attempted take-over of Norfolk Southern in a deal that would create a $20 Billion dollar company, I mention this because CP says as part of the purchase price Norfolk shareholders would be paid in stock and cash (no indication of how much yet) which if CP has to come to the currency market to buy US Dollars could provide a temporary boost to USD.CAD.

As mentioned currency markets today will be focused on the release of the minutes from the last Federal Reserve policy meeting, investors will be looking to see how the vote went and also any indications that the Fed is moving to increase interest rates next month. If there is a positive tone for an interest rate hike, then look for USD.CAD to move higher, if the tone is kind of dovish we will see the rate fall.

GBP

The market was a little surprised when Core CPI (CPI without oil, food, alcohol and tobacco) came in at +1.1% YoY slightly higher than the expected +1.0% with the result that both Cable and GBPEUR were bought.

German ZEW was better than expected but had little effect on GBPEUR, which moved higher all day as the market focused on negative sentiment towards the Euro. Cable may well be the mover today with FOMC Dudley speaking at 13:00 pm UK time today and the release of the FOMC minutes this evening.

Euro

Still struggling with negative sentiment after the weekend's tragic events with many wondering if ECB President Draghi can do anything but cut rates and extend/increase QE to keep the stuttering Eurozone revival going. German ZEW economic sentiment was an excellent 10.4 and higher than the expected 6.7 but didn’t manage to improve sentiment to any large degree and the Euro continued to be soft all day.

France announced that it will breach the EU deficit goal as security spending rises with the combination of events and financial data pushing EURUSD lower and revisiting levels seen last April. The Paris terror story is unfortunately continuing and does not make for positive Euro sentiment.

USD

The US Dollar is marginally stronger this morning, the Greenback continues to gain momentum on the expected interest rate hike in December and is also benefiting from the nervousness in Europe at the moment. Overnight the Euro did get a small bounce on a better than expected economic sentiment report but given the current situation in Europe (ECB increasing stimulus and the Paris attacks) it was not able to extend those gains as the morning went on. Overall the Euro should continue to trade with a weak bias, and the US Dollar should continue to benefit.

CAD

Nothing of note to report on USD.CAD again this morning, the Loonie was able to garner some minimal strength in the early parts of the evening with some overnight orders being filled for US Dollar buyers however as the night went on the Loonie gave back those gains and we open this morning right where we left it last night. USD.CAD continues to trade in tight ranges and may do so until we hear from the Federal Reserve or the Bank of Canada in December.

Up today, currency traders will be watching for any signs of US inflation as we get the release of the US CPI report for October, any signs that inflation is growing in the US will push USD.CAD higher, if the number is subdued then we may see the US Dollar give back a little strength as low inflation may give the Fed a reason to pause on an interest rate hike. We also get some Manufacturing data out of the US, but I think the market will focus on the inflation data unless it surprises to the downside.

GBP

After very early volatility the Pound had little momentum as the market digested the weekend’s events and now looks forward to today’s CPI (consumer price index). Market expectations range from -0.1% to +0.1% and we also have the release of the retail price index and house price Index.

After the dovish Bank of England inflation report the week before last a surprise to the topside will push Cable and GBPEUR higher with a low number doing the reverse.

Euro

Interestingly enough the Euro managed a small rally from its opening levels before falling back in the afternoon. ECB President Draghi said little of interest and Euro zone Final CPI was slightly above expectations at 0.1%. The market had one eye on news from Paris with the ECB’s Praet commenting that the Paris attacks may pose a threat to the Euro area’s sluggish revival.

However, Bloomberg report quoting Todd Sandler from the University of Texas said that “A diversified economy like France will experience no adverse influence from the attack whatsoever.” The report quoted that the Sep 11 attacks on the US estimated losses of less than 0.1% for the US economy.  As the day wore on the Euro did weaken with the market putting this down to the diverging interest rate expectations of the ECB and FED. German ZEW economic sentiment will be looked at for direction today.

USD

The US Dollar is marginally stronger this morning as sadly it picked up some strength as a result of the Paris terrorist attacks on the weekend. The Euro which is already under pressure from further ECB stimulus program increases next month fell on the opening this morning as investors moved money to the US Dollar in search of safer haven products. The fear is that this could be the start of a concerted terrorist attacks and could damage the European economy even more. ECB Governor Draghi will be speaking in Madrid later in the day and my guess is that he will try and reassure investors that in the event of a crisis the ECB will act quickly and not wait for their next meeting in December, look for Euro to continue to trade with a weak bias over the sort-term.

In other news overnight Japan’s economy entered their 4th recession in the last 5 years as that economy contracted 0.8% in the third quarter (last -1.2%), this result will push the Bank of Japan to ramp up their stimulus program, not that its present program has had much positive effect.

CAD

The Canadian Dollar is unchanged against the US Dollar this morning and USD.CAD remains at the top end of recent trading ranges, with the weakness in the Euro the Loonie did pick up some gains against the common currency but I am not sure just how much more it will pick up today. Once again I am not seeing anything on the horizon that would give the Canadian Dollar any sustained strength so at some point this week I look for USD.CAD to break a little higher.

Up this week we have a slew of data to look over highlighted by Canadian and US CPI reports, the FOMC minutes from their last meeting and US Leading Indicators on Thursday. Up today we get the Empire State Manufacturing Index out of the US and Canadian Manufacturing Shipments report so we could have a busy morning, with developments unfolding in Europe look for currency markets to remain nervous, if there are any more attacks then the US dollar will benefit.

USD

The US Dollar is marginally weaker to start the day but, for the most part, it is nothing significant. Yesterday Fed chairperson Janet Yellen in her most recent speech did not drop any hints as to the timing of a future interest rate hike in the United States, the Greenback did trade a little weaker over the course of the day but was able to pick up that strength back up this morning. In other overnight news, German GDP rose 0.3% in the 3rd quarter, not enough to get anybody excited and not enough to dampen the expectation of further QE (quantitative easing) at the next ECB meeting.

CAD

USD.CAD tried to push higher yesterday but as the US dollar weakened off the rate pulled back a bit but still trades at the high end of the recent range. With the weakness in the Loonie yesterday it continues to lose a bit of ground to the Euro and has now given back about 150 points from its strongest position over the last week. Once again Euro buyers need to be able to react to anytime we see small amounts of strength in the Loonie, so far this year the Loonie has not gone any extended runs.

GBP

Having stayed firm overnight except against the AUD the Pound gained more ground early on as the ECB President Draghi gave a dovish testimony to ECB monetary policy. He kept the market firmly focused on changes to the monetary policy at the ECB’s December meeting but interestingly enough the Pound and the Dollar didn’t make large strides higher. BOE economist Haldane was on the wires again saying that the case for raising rates is still some way from being made, so the Pound eventually stayed at recent levels and now waits for UK construction output at 09:30 am and US data later in the day for guidance.

Euro

Early German CPI came in at 0.0%, way below the ECB’s 2.0% inflation target and it was logical for ECB President Draghi to comment that the ECB would “closely monitor risk to price stability and thoroughly assess strength and persistence of factors that are slowing the return of inflation to levels below but close to 2%”. He continued with “If price stability is at risk, we will act by using all instruments available within our mandate.” And also said that Greek bonds could become part of QE if conditions are satisfied.

After a quiet week to this point, we do get some activity on the economic front with the release of the US Retail Sales report for October where the market is expecting a 0.3% (last up 0.1%). If we see a strong Sales number look for USD.CAD to take another run at the topside of the recent range, only a very poor number should give any momentum to the Loonie.

USD

The US Dollar is marginally stronger this morning as North American banks get back to full staffing mode. The Euro was a bit weaker overnight as ECB Governor Draghi said in a statement that the central bank “will re-examine the degree of monetary policy accommodation” during its December meeting, most likely code words for more stimulus and a possible further interest rate cut. In the US market watchers well be waiting for Federal Reserve Chairperson Yellen’s speech today to see if she drops any further hints about an interest rate hike in December if she hints at a rate hike then we could see some enhanced volatility in the currency market.

CAD

USD.CAD has moved steadily higher and opens the morning near the one-month high, not sure what is driving this push this morning, but it does seem like it wants to test higher at the moment, The Loonie is also losing a little ground to both the Euro and Sterling this morning.

GBP

UK Average Earnings were still strong at 3.0%  although lower than the expected 3.2% but the UK employment rate was the highest since records began in 1971 with the unemployment rate down to 5.3%. BOE’s economist Haldane rather than being overtly dovish as he was in September commented that there has been “pretty solid growth”, but not spectacular.  With a positive story and in a thin market (the US were taking Veterans day holiday) the Pound made good ground against both the Euro and Dollar. It wasn’t a rush higher, more of a squeeze higher all day, especially in late London trading. No UK data today but we do have European and US data later.

Euro

The market had been waiting for Draghi to speak at the London conference but he only talked about the need for closer European banking union and the market maintained its theme of Euro weakness, so we didn’t move. Draghi does talk this morning on monetary policy early on, and we also have European Industrial production due for release. Already released German CPI MoM was 0.0% and in line with expectations again missing the ECB’s inflation target. After this morning’s events, we hopefully get more clarity on the ECB’s December meeting.

USD

A very quiet overnight session as North American banks are closed for the Remembrance/Veteran’s Day holiday. The US Dollar remains strong as it still benefits from the positive US employment report and the growing expectation of a US Federal Reserve interest rate hike in December. The Euro also remains under pressure as the expectation is the European Central bank will announce an interest rate cut and further stimulus measures at their next meeting.

CAD

USD.CAD continues to range trade near the top end of its short-term highs in quiet overnight and intra-day activity. Yesterday the Parliamentary Budget Office indicated that the if the new Liberal government was to do nothing the balance of accounts for Canada will show significant deficits over the next four years, this was attributed to the slowdown in the Canadian economy due to the oil meltdown. When the new Government announces their spending programs this will push the deficit level much higher than their initial predictions, while the current Debt to GDP ratio makes this sustainable over the short-term this ratio will start to climb and international investors will take note. This will be a long-term factor for the Loonie going forward and will prevent any significant Canadian Dollar strength over the next few years.

With nothing out on the economic front today and most banks on skeleton staff due to the holiday one of two things will happen. Either the market will be dead and the currency won’t move or the market will be so illiquid that we will have a massive move for no reason, I have seen both during my 35 years of doing this. Our office is closed for the day as we cannot effect same day payments but we do have a small staff in the office if you need anything.

Have a great day and remember to pause today to reflect on what we have here in Canada and to remember the sacrifices that were made and are still being made today to guarantee that way of Life. Mrs. Smith and I visited the Normandy landing sites in 2010 and we visited both the Canadian and American war cemeteries there, it was one of the most moving experiences of my life and I highly recommend everyone doing it at some point.

USD

The US Dollar is for the most part unchanged this morning; it is a little stronger against the Euro, a little weaker against the Pound and unchanged against the Canadian Dollar, very quiet overnight session with little action. Reuters issued a report this morning that said the ECB is considering cutting its deposit rate deeper into negative territory that after the last ECB statement is nothing new, so the currency markets pretty much ignored it. No change in the overall sentiment for the US Dollar, the expectation of a US Federal Reserve interest rate hike in December is still giving strength to the Greenback and should prevent it from losing value over the next few weeks.

CAD

A very quiet night for USD.CAD as it is pretty much right where we left it last night, the Loonie is still trading with a weak bias after the employment reports on Friday and any significant strength for the Loonie should be limited over the short-term by the impending US interest rate hike. The Loonie was able to pick up a little strength against the Euro overnight; Euro buyers may want to take advantage of this today.

Up today we get some US trade data for September and October, once again a positive report will give further credence to an interest rate hike and give the US Dollar a bit of a boost, nothing significant but we may see USD.CAD jump on the release. If the number disappoints then we could see the currency pair drop back a little on the day; overall I still feel we will range trade for the next little while.

GBP

Struggling over the past 48 hours and against a raft of Dollar bullish sentiment the Pound managed to claw back some ground against the Dollar. GBPEUR pushed higher in the afternoon after a Reuters report that noted that the ECB would cut interest rates in December, and it was announced that Greece hadn’t reformed enough to release the latest batch of EUR 10 billion funding agreed in the bailout package; they have until Friday to do so. Today will see UK PM Cameron outline his demands for changes to the EU before the UK’s referendum vote as well as sending a public letter to the president of the European Council Donald Tusk (who’s election to the position of President Cameron tried to block). Sterling could well move on headlines from these events.

Euro

Firm first off after better German trade figures but soft in the afternoon after a Reuters report commented that a consensus was forming at the ECB to take the interest rate it charges banks deeper into negative territory in December. Reports that Greece also had not been able to implement reforms that it had agreed to when it was bailed out in the summer, also weighed on the Euro. Catalonia’s Parliament approved a resolution on Monday to take steps to establish an Independent Republic. The Spanish PM Rajoy said his government would file an appeal with the Constitutional Court to ensure that an independence declaration backed by the Catalan regional Parliament would have "no consequences". Not good background news for the Euro.

Have a great day

USD

The US Dollar is lower this as the market continues to react to the US employment data from Friday. The economy created some 270K new jobs last month, and the unemployment rate fell to 5.0% that blew away market expectation. On the release of the report, the US Dollar jumped much higher with EURO.USD is dropping over 150 points in a few minutes, USD.CAD rose to trade 100 points higher in the same timeframe. The small overnight pullback looks just like speculators taking some profit on Friday’s move, with this strong employment report increasing the chances that the Fed will increase interest rates next month we should see the US Dollar maintain its momentum over the next few weeks.

CAD

As mentioned USD.CAD did recover a little last night, but the Loonie had a tough day on Friday, the Canadian employment report from Friday was also very robust, but that came on the back of the hiring of temporary workers for the Federal Election. I am not sure why Stats Canada would include these workers, they have only skewed the report and will be backed out next month, the Loonie was caught up in the strong US Dollar and last night’s pullback may be the calm before the storm.

GBP

Still smarting from BOE Governor carney’s slap on Thursday, the Pound steadily lost ground in the morning despite better than expected Manufacturing production at +0.8% MoM higher than the expected +0.4%. Industrial production was slightly worse than expected, but the UK Trade balance was only -£9.3 billion rather than the expected -£10.7 billion.

The good news for the Pound was that it was not the worst performer as the Euro was hit even harder and GBPEUR made back half of the ground it had lost yesterday. Despite the BOE pushing back interest rate expectations, the ECB is looking to push their rates lower, so GBP/EUR is stair casing higher still, although probably now at a much slower pace. The economic calendar is quiet today, but we have average earnings, and BOE Governor Carney speaks on Wednesday and construction output on Friday.

Euro

German Industrial output saw a 1.1% drop that was the biggest fall in a year and kept the Euro under pressure. When the US NFP was released EUR/USD lost 1.5% in 15 minutes, a very quick move. The biggest interest rate divergence in the major currencies is the EUR/USD with the FED looking to raise rates and the ECB looking to lower them overall so the market will keep pushing on this side. As the economic data is pointing that way as well the next 6 weeks or so at least will probably have a steady theme of Euro weakness. ECB President Draghi speaks on Wednesday and Thursday, and we have German preliminary GDP QoQ and Eurozone trade balance on Friday.

USD

The US Dollar is marginally stronger this morning ahead of the release of the US employment report for October. The US Dollar garnered some momentum as Fed Chair Janet Yellen stated yesterday that a December interest rate hike is a “live possibility” but depends on the data. I think a strong showing on today’s employment number and also the November report will push the market over the edge, and economists will go back to fully expecting an interest rate hike. The market is expecting the US economy to have created 184K new jobs, anything north of 200k will get the interest rate hike camp all excited (which will push the US dollar higher) and anything less than 160k will push the US dollar a bit lower.

CAD

USD.CAD is a bit weaker this morning and pushing up against the recent highs of the past few weeks. In addition to the US employment report today we also get the Canadian report for October, we are expecting 10k new jobs to have been created but as we have seen over the course of the last year this number has been quite volatile and bank economists rarely get it right in their predictions. The Canadian report will get a bit dwarfed by the US report as it usually does when they are released together, only a very strong Canadian number will help the Loonie. A strong US number and a poor Canadian number should be enough to push us towards the 1.3300 level again in quick order.

Additional

GBP

GBPEUR was pushed higher early in London trade after very weak MoM German factory orders but fell back from levels not seen since August on position squaring before the BOE data dump at mid-day. When the inflation report and MPC vote was released, both Cable and GBPEUR were sold hard as the BOE said that inflation would not exceed its 2% inflation target until Q4 2017. This of course meant that UK interest rate hikes were pushed further back and a market that had bought GBPEUR pretty much most of this week was wrong-footed and had to sell Sterling quickly. Carney continued in his press conference by commenting that Sterling would continue to affect CPI in two years and that a strong Pound was helping to push down inflation. The comments were broadly taken in a dovish manner by the market and GBPEUR and Cable finished London trading some 1.25 % lower on the day. Carney’s late comment that it was “reasonably prudent to think BOE will rise in 2016” was ignored. Away from “super Thursday” It was announced that UK PM Cameron will publish the UK Governments EU demands letter next week. On the EU’s behalf, European Commissioner Moscovici said that they “all wanted the UK in the EU”.

Euro

German factory orders were a very poor -1.7% MoM and pressured the Euro before it was given a lift by GBP - EUR sales. The European Commission economic forecasts were unremarkable, but the ECB was quoted as saying that a “stronger Euro and falling oil were to blame for slower inflation”. Despite this comment, the Euro held its ground against the Pound and traded in a tight range on the day against the Dollar.

ROW

Range trading but with an eye on tomorrow’s big data release and falling after a large AUD option expired at 15:00 pm UK time.

Oil and commodity markets have been soft this week, so the Antipodeans have been under pressure.

The Norwegian central bank kept rates unchanged at 0.75% with the Governor commenting that there is a 50% chance of a rate cut next year.

USD

The US Dollar is for the most part unchanged this morning with the big exception being Sterling. This morning (7:00 am) the Bank of England announced it was keeping its interest rates and stimulus program at current rate's but the accompanying statement has a very ominous tone to hit. The committee has downgraded growth for 2015 and 2016, lowered their inflation forecast from 2% to 1% and expressed fear of an abrupt slowdown in emerging markets. This statement is very surprising as just a few weeks ago the Bank of England was expected to increase interest rates, with this negativity there is no way that is happening anytime soon, if anything they will cut rates and increase stimulus before increasing them again. As you would expect both GBP.USD and GBP.CAD have been hit hard on this report, both are down over 100 points since I got in and the momentum will most likely take them lower still.

The Greenback did get a bit of a boost yesterday on the positive trade data as the US trade deficit narrowed on September. Canada also showed some signs of an improving trade deficit as exports grew a small amount in September, the weak Loonie is helping the export economy in Canada and making up a bit for the drop in oil prices.

CAD

USD.CAD has a very quiet night and after yesterday’s move higher remains at the top end of the recent range. It looks like it is poised for a break above the 1.3200 level but that view will be confirmed with tomorrow’s US and Canadian employment reports. The Loonie has done very well against Sterling this morning and may present a good opportunity for Sterling buyers to pick up some extra value.

The only item of note on the economic calendar today is the US productivity report for the third quarter, overall USD.CAD should remain supported at current levels and we will see what develops from the employment picture tomorrow.

In other news Justin Trudeau was sworn in, full list of cabinet members can be viewed HERE.

Additional

GBP

UK Services PMI was a slight beat whilst Euro Services PMI was a slight miss…The result in GBPEUR was a stronger Pound which actually gained some 0.75% over the Euro on the day in a relatively quiet trading day. Cable  wasn’t so fortunate as Fed Chair Yellen’s comments later in the day produced Dollar buying and Cable ended up slightly lower on the day.

Traders have been waiting for today’s Super Thursday and the press is speculating that the MPC vote will be 7-2 rather than 8-1. Market analysts are not so sure as BOE Governor Carney has repeated that the UK inflation picture will receive more “clarity” at the end of the year and we have another month to go before then. The inflation report will be keenly inspected  and Governor Carney speaks at 12:45 pm.

Euro

Persistent pressure on the Euro saw it slip most of the day with the bond markets still pricing in wider spreads between the Bund and US Treasury markets. The ECB commented that it sees a bigger indirect impact from the Chinese slowdown and this added to the general negative sentiment surrounding the Euro. We have European Commission economic forecasts at 10:00 am and ECB President Draghi speaks this morning just before the BOE data is released and if he is dovish then we could get a big move in GBPEURO again.

USD

The US Dollar is mixed this morning in a very quiet overnight trading ranges. The Dollar got a bit of a boost early this morning as European Central Bank Governor Draghi stated that they would look at their current levels of stimulus at their December meeting and they stood ready to add more stimulus if the European recovery needs it. Sterling found a little support this morning as that economy produced some better than expected services sector data but overall it was a very quiet night with little activity. It looks like the FX markets are awaiting Friday’s US employment to get some direction.

CAD

The Canadian Dollar had a very strong performance yesterday, initially USD.CAD spiked much higher in the morning and looked like it would push to 1.3200 but in the late morning the Loonie started to rally and the currency pair recovered by over 100 points. I am not sure what was driving the activity, there was nothing of consequence released on the economic front. Again you have heard me say this before but anytime we see a drop like this US Dollar buyers need to be ready with their orders and pick up some US, it is the best strategy to employ at the moment. The Loonie has also done very well against the Euro creating a good opportunity for Euro buyers at the moment.

Up today we get some trade data out of both Canada and the US, I will be paying attention to the Canadian number to see if there is any growth in our export sector but for the most part it should be a relatively stable day as we await both the Canadian and US employment numbers on Friday.
 

GBP

The UK construction PMI was as expected so Sterling stuck to its recent ranges, especially as the market is hearing about option strategies being bought which pay out if 1.5100 and 1.5525 stay intact over the next few weeks. GBP/EUR is a different matter and that pushed higher again in expectation of ECB President Draghi  speaking later in the evening.

Afternoon comments from UK Chancellor Osborne saying that the UK rejects “ever closer union” in talks with the EU had little effect. Today we see the release of the most important PMI, UK Services so if it’s a good figure we could well push higher GBP/EUR.

Euro

The bond markets widened the spread for holding US Treasuries over German Bunds by another 2.5 basis points yesterday implying that they are expecting a US rate hike or an ECB easing or both by the end of the year. This kept the pressure on the Euro for the day despite lacklustre US figures. Draghi spoke late in the day and his comments that the ECB will review policy in December, that the ECB is both willing and able to act caused more Euro sales. European services PMI is released today and will provide guidance.

USD

The US Dollar is marginally stronger this morning as it bounces back from its poor showing over the past few days. Overnight EURO.USD was about 50 points lower and Sterling was down about 40 points from the Toronto close, not a great performance by the Greenback but enough to reverse the trend over the past few sessions. There was no real reason that I could ascertain why the dollar would suddenly reverse course so I think this is just a matter of a small correction and until we see some better economic signs coming out of the US or the Fed announces an interest rate hike the Greenback should continue to trade with a weak bias.

CAD

The Canadian Dollar had a very quiet day yesterday and overnight lost a small amount of ground to the US Dollar, USD.CAD continues to trade in uninspiring ranges and will need a big event to get it to break out of its current trading pattern. If you are a buyer of Euro or Sterling you have done well overnight as both EURO.CAD and GBP.CAD are near recent lows, it might be a good time to take advantage of those levels.

With just US Factory Orders for September on the docket for today I am not expecting much of a trading range. If we get a very poor number we may see USD.CAD break a little lower.
 

GBP

Propelled higher early on by an excellent UK Manufacturing PMI, coming in at a 16 month high of 55.5. Unfortunately there wasn’t any further good news for Sterling and GBP/EUR and Cable both fell back to their opening levels at the end of the day. The market will look for Construction PMI at 09:30 am to give us the next move.

Euro

The market is drawing parallels between central bankers and unreliable boyfriends who say they are going to take you out for dinner one day and then ring you the next to take a rain check. We are used to the Fed saying they want to raise rates and then not doing so but it appears that the ECB President Mario Draghi has now caught a similar affliction. Last month he was clear in leading the market to expect additional stimulus in December but he spoke at the weekend in an Italian press release saying that the need for boosting QE was an “open question” . He also said that it was “too early” to pass judgement on lowering the deposit rate. Now that the Euro has lost some 5 % since levels seen in October has he had second thoughts? Draghi speaks this evening, so it will be interesting to hear if he has any updates.

USD

The US Dollar is marginally weaker this morning in a very quiet overnight session, the overall strength of the US recovery still weighs on investor confidence as we begin a new trading month. On Friday the market received more discouraging US economic news as both the Consumer Sentiment survey and Personal Spending report came in below market expectation, the numbers were not horrible by any stretch but they do continue a pattern of poor US economic data.

Gains for EURO.USD were muted overnight as there was mixed manufacturing data coming out of the Euro-Zone, I guess it is a case of whichever economy performs the least poorly wins the prize.

CAD

The Loonie also had a quiet night but did lose a little ground to the Greenback overnight, as well it lost a little ground to both the Euro and Sterling so not a strong start for the new month. I don’t look for much of a change to the trading pattern for USD.CAD this month, where we go will depend on what the economic data shows which will ultimately then cumulate with the Federal Reserve announcement on interest rates in December. Ahead of that I still favour the Loonie to be very vulnerable to weakness and only very weak US data or stronger than expected Canadian data would change that view.

Trading this week will lead up to both the Canadian and US Employment data on Friday but ahead of that we will get some direction from secondary data from both the US and Canada, we also get an interest rate announcement from the Bank of England but I don’t think any economists are expecting changes to their interest rate policy this time around.

USD

The US Dollar is marginally weaker this morning as the market digests the news that the US economy grew at an annualized pace of 1.5% in the third quarter (expected was 1.6%), the slew of poor US economic data continues to show the US recovery is under pressure. It will be interesting to see if the continued bad economic news changes economists prediction of a rate hike in December, after the Fed announcement earlier in the week the probability of a rate hike was 50/50 and it is still at those levels. Overnight the Bank of Japan kept their stimulus program levels at current levels(there was an expectation that they might increase it, as a result the Yen jumped both against the Greenback and Loonie.

CAD

Not much to report for USD.CAD, it had a very quiet night with the Loonie picking up a little strength off of the weak US Dollar but nothing of significance. After the wild ride for USD.CAD on Wednesday I would not be surprised if the currency pair settles back into some range trading for a little while. The Loonie continues to hold onto its recent strength against the Euro and has picked up a little against Sterling as well but not as much as against the Euro. GBP.CAD still trades well above the 2.00 level.

To the end the month we get a slew of US secondary data but USD.CAD trading will be paying attention to the Canadian GDP report for August. We are expecting a monthly growth rate of 0.1% (I wonder if the Toronto Blue Jays will have an effect on the number, lots of money was spent across the country in bars and restaurants, only a widely different number than expectation will get the currency really moving.

Have a great weekend and a safe Halloween, remember the clocks go back an hour on Saturday. The Long winter begins!

Happy Halloween
 

USD

The US Dollar is marginally lower this morning as the financial markets digest the words from the US Federal Reserve yesterday. Given the Fed’s language in the release yesterday economists are now predicting that there is a 50/50 chance that the Fed will increase interest rates in December. For me, I am now on the side that they will increase interest rate a quarter point, they have said all year long that they wanted to increase interest rates this year if the conditions were right and with the language about the global slowdown being removed from the statement this time around I think they have now setup the market for the first rate hike in years. There is still a month’s worth of economic data to sift through before the next meeting and if it turns really bad my view may change but right now I favour the rate hike which will be seen as a US Dollar positive.
 

CAD

I was listening to the news on my drive home last night and the guy on CBC said the Canadian Dollar made a small gain on the day against the US Dollar, that statement made me laugh as it did not even remotely tell the story of yesterday. For most of the day the Canadian Dollar was on a great run against most currencies but within two minutes after the Fed announcement it had given back most of those gains as USD.CAD jumped 120 points after the announcement, the poor radio announcer had no idea what a volatile day the Canadian dollar had. Overnight USD.CAD like other major currency pairs had a very quiet night and has settled down at current levels.

Up today markets will be led by the US GDP report for the 3rd quarter, on an annualized basis we are expecting a growth rate of 1.6% which is well down off the 2nd quarter reading that showed the US economy was growing at a 3.9% annualized rate. Not sure how the Fed can raise interest rates when your economy is only growing at a 1.6% rate but there you have it. If we get a poor reading under the 1.6% level I would expect that the US Dollar will get hit hard. Get your orders in early as we could see more extreme volatility surrounding the release.

 

USD

The US Dollar is slightly weaker this morning as the financial markets await word from the US Federal Reserve on interest rate policy this afternoon. EURO.USD which had been trading weaker since last week’s ECB announcement (the possibility of more stimulus measures) pulled back a little overnight but still is trading with a weak bias. Once the Fed reports today markets will look to the Bank of Japan interest rate announcement on Friday where they are expected to announce further stimulus measures for their own economy, clearly the global recovery is now in doubt and we could be again in for a period of reduced global growth.

CAD

The Canadian Dollar has improved a little overnight against the Greenback but still is at its weakest point in the last few weeks, it has also given back some of its strength both against the Euro and Sterling so overall the Loonie is starting to lose momentum.

Currency trading over the past few weeks has been leading to this point today where the US Federal Reserve will make their interest rate announcement at 2:00 pm. Over the course of the last year the Fed Committee has been saying that they will increase interest rates at some point in 2015, given the current economic picture in the US at the moment it is very unlikely that they will increase interest rates today. The big question is will they increase interest rates in December (their next meeting) or given the poor economic performance of the US economy lately push off any rate hikes until 2016. If they come out and hint today that they won’t raise rates in December then look for USD.CAD to move much lower and setup for a re-test of the 1.3000 level, if they come out and say they are still on a path to increase interest rates this year then USD.CAD should move higher and re-test our yearly highs. Best strategy if you are either a US Dollar buyer or seller is to hedge part of your exposure at current levels and take some of the risk of an adverse move out of your business.


 

USD

The US Dollar for the most part is unchanged this morning, yesterday’s poorer than expected US housing data but a damper on the US Dollar and provided further fuel to the view that the US Federal Reserve will not increase interest rates tomorrow. The big mover overnight was Sterling as that country reported its GDP growth rate came in lower than the market expectation, GBP.USD initially dropped about half a percent before recovering to current levels as the morning wore on. The Bank of England was expected to follow the Fed in increasing interest rates but poor economic data has also tempered that view.

CAD

The Canadian Dollar is marginally weaker against the US dollar in quiet overnight trading, once again the currency markets are focused on the US Federal Reserve report tomorrow and should remain subdued ahead of that announcement. The Loonie had been on a great run against the Euro as the weakness in the common currency was a benefit to the Canadians Dollar, that currency pair has not stabilized and with overnight weakness in the Loonie EURO.CAD is starting to push back higher. Euro buyers should be looking at these levels as a good opportunity and look to hedge some exposure with forward contracts.

Up this morning we get a slew of US secondary data including Durable Goods Orders and the Consumer Confidence report, the US Dollar should come under a little bit of pressure if we see more negative news. Only some very strong reports would push the Greenback higher but given the lack of positive data out of the US lately I doubt that will happen.

 

USD

The US Dollar is marginally weaker in quiet overnight currency markets as we start the last week of October. EURO.USD jumped higher overnight on the general weakness in the Greenback, I would think any medium-term strength in the Euro would be capped as the markets await the December meeting from the ECB on just how much more stimulus they are going to inject in the market. Given that the US Federal Reserve is looking to increase interest rates at some point and the ECB is looking to add more stimulus to its economy it is not hard to see that the US Dollar should do better against the Euro in the coming weeks.

CAD
The USD.CAD rate dropped from its highest levels on Friday but the Loonie remains under pressure from its Southern neighbour, overall the Loonie is quite a bit weaker against the US Dollar off of its strongest levels early in the month. It looks like we will see the Loonie range trade to start the week as we wait on the Federal Reserve announcement on Wednesday, given the weakness in the global and US economies at the moment I don’t think a rate hike is on the cards this time around, investors will be focusing to see if the Fed strongly hints at a December rate hike, such a hint will push the US Dollar higher in the short-term.

In addition to the Fed announcement this week we also US GDP data on Thursday, Canadian GDP data on Friday and loads if US secondary data throughout the week, given that we have the Fed announcement it could be a very volatile week so get your orders in early to take advantage of any volatility.

 

USD
The US Dollar is weaker this morning after having a very strong day yesterday. In Europe yesterday, ECB Governor Draghi came out and reduced growth rates in the EU and said the Central Bank would “examine” their stimulus program when they make their December rate announcement. Markets have taken the view that more stimulus will be announced in December and stock markets throughout Europe have all jumped higher this morning and the Euro has been hit hard. The severity of the Euro sell off has caught me by surprise, EURO.USD has dropped to trade at 1.1100 this morning and EURO.CAD is down near 1.4500 its best rate on the inter-bank market in weeks. I would now expect the Euro to stabilize through November (ahead of the December meeting) but it will depend on what the Federal Reserve does next week.

CAD
The Canadian Dollar has made small gains against the US Dollar this morning, as I write it has been reported that the Chinese Central Bank has cut its benchmark interest rate by 0.25%, this move has caught all markets by surprise and should provide immediate strength for all the commodity currencies, USD.CAD has dropped by 50 points on the news already this morning. The Loonie continues to soar against the weak Euro and is making smaller gains against the Pound but at present the Chinese announcement is not having much effect on the US Dollar.

Up today we do get inflation data out of Canada but with the Bank of Canada stating yesterday that inflation is within acceptable levels I don’t think this number will have a big effect on trading unless it really surprises. Look for this Chinese news to filter through the markets and the Loonie should get stronger as the morning wears on but we will stay within recent ranges.
 

The US Dollar is marginally stronger in quiet overnight trading conditions, financial markets now await the interest rate policy announcement due out at 07:45 this morning from the European Central Bank. There is a growing optimism that the ECB may increase the amount of their quantative easing program to further support the EU economy, if this is the case you should see the Euro make a jump both against the US and Canadian Dollars.

In the UK Sterling is stronger as that economy reported a big jump in Retail Sales last month, economists were expecting an increase of 0.3% and the number came in almost at 2.0%, quite a big jump for an economy that had been treading water.

USD.CAD had a very quiet night as it traded in a very tight range, it was not able to recover the momentum it lost on the Bank of Canada report yesterday, I think the fact the BOC reduced their expected growth rates for 2016 and 2017 put a bit of a damper on the Loonie.

The overall market sentiment is still for a weaker US Dollar but as we have seen in the past that can change very quickly so US Dollar buyers should not be waiting for the Loonie to have a big rally, instead picking up small amounts whenever we see any strength in the Loonie.

We have some more secondary US data today including Leading Indicators for September but trading today will be headlined by the Canadian Retail Sales report for August. If we get a poor reading then I think you will see USD.CAD move higher, it won’t be a big move but the Loonie will remain under short-term pressure.