Sliding Greenback

The dollar continues to slide after Friday’s dovish Powell speech and downbeat PMI figures.

Previous Day's Market Highlights

The dollar lost further ground on Monday, with the greenback hitting its lowest level against a basket of peers since October, after non-manufacturing PMI figures missed forecasts to show a sharp contraction from the previous month. The index dropped by three points to 57.6, reaching its lowest level since August and further fuelling fears around a looming global economic slowdown. Also weighing on the dollar were Friday’s comments from Fed Chair Powell and a possible shift toward a more dovish policy going forward as well as an improvement in global risk sentiment which dented demand for safe-haven currencies.
 
Sterling had a mixed day, gaining against the greenback due to dollar weakness, but sliding against the euro as a result of ongoing fears over a ‘no deal’ Brexit. The pound lost 0.3% against the single currency over the course of the day. Of notable news, government sources seemingly confirmed the date of the meaningful vote to be 15th January while also denying any plans for a further delay. In sharp contrast, the euro proved resilient despite lower than expected German factory orders. Over the course of the day, the euro gained 0.6% and was on track for its biggest rally in more than a week.
 
Elsewhere, Canadian PMI figures showed above forecast expansion although this is unlikely to give the BoC enough cause to hike rates later this week. The loonie gained across the board, trading half a percent higher against the dollar and the pound. The only other data of note was retail sales figures from the eurozone, which surprised to the upside, reaching their highest level since January, recording an increase of 0.6% on a month-on-month basis.

Away from FX, European equity markets lost ground after Friday’s rally, with indices in the UK, Germany and France losing around 0.4%. In contrast, US equities recorded modest gains of around 0.7% as investors grew increasingly hopeful for developments on trade between the US and China. Finally, crude oil prices rallied, with WTI gaining around 2% on the prospects of Saudi-led production cuts.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1151 1.1180 1.1004 1.57%
GBP/USD 1.2761 1.2800 1.2440 2.81%
EUR/USD 1.1443 1.1496 1.1269 1.88%
GBP/AUD 1.7921 1.8190 1.7291 4.94%
GBP/NZD 1.8952 1.9025 1.8117 4.77%
GBP/CAD 1.6954 1.7392 1.6700 3.98%

Today's Market Highlights

Today's economic calendar is quiet, especially with US Trade Balance figures set to be delayed due to the ongoing government shutdown. With a lack of macroeconomic data to stimulate markets, focus is likely to shift back towards geopolitical risk namely in the shape of Brexit as well as ongoing US-China trade talks. With the first day of debate on PM May’s Withdrawal Agreement set to begin tomorrow, sterling traders may begin to adjust their positions in anticipation of the vote outcome next week.
 
Data-wise, there is little in the way of significant releases, however the pound may be impacted by the latest Halifax HPI figures especially after a steep fall last month. Elsewhere, Canadian trade balance figures for November are expected to show a widening of the trade deficit to -1.9bln CAD. Although the Bank of Canada meet tomorrow, this release is unlikely to have any impact on their decision making.
 
Tomorrow is a much busier day, hence major pairings are likely to be confined to their well-defined ranges ahead of both the Bank of Canada meeting and release of Fed meeting minutes tomorrow afternoon.

Today's Economic Calendar

Time Currency Release Consensus Previous
8:30am GBP Halifax HPI (m/m) 0.2% -1.4%
1:30pm USD Trade Balance -54.0bn -55.5bn
1:30pm CAD Trade Balance -1.9bn -1.2bn