News & analysis

GBP

Sterling made minor gains against a broadly weakening US dollar yesterday, a theme that continues today. However, with Parliament breaking for the Christmas period later today, and much of the Brexit uncertainty remaining, sterling may find the road higher much harder to travel. The final reading of Q3 GDP is released today, with no change from the preliminary 1.5% reading expected. The GFK Consumer Confidence measure hit a 5-year low this morning despite unemployment levels at 4.1% and wage growth at a 10-year high, just evidencing the impacts Brexit uncertainty is having to the UK economy.

EUR

“All eyez (sic.) on me” may have been a brilliant rap album by the artist known as 2Pac, but it definitely wasn’t the anthem of the single currency yesterday as it mostly stayed out of the spotlight, although it nevertheless managed to stage a strong rally against the US dollar. The euro may finally be picking up some tailwinds again as the European Union versus Italy budget clash seems to be postponed for now, while the Current Account showed exports may be more of a boost to the Eurozone economy in Q4 than it was in Q3. The Current Account data for October came out at +€23.0 billion, better than the €17.6 billion surplus in September. Consumer Confidence at 15:00 GMT is the last data release for the Eurozone before Christmas, which implies euro moves may be driven by option expirations today and developments elsewhere.

USD

Turmoil suddenly surrounds the greenback towards the end of the year with equity markets coming close to bear market territory, a looming government shutdown and the last adults leaving the room of the Trump administration. The S&P 500 index dropped around 5% in less than 24 hours on Wednesday and Thursday, bringing the total decline from top to bottom this month above 15%, where a 20% decline indicates a bear market. The likely explanation for this is that markets realise the Federal Reserve is committed in taking away the punch bowl of monetary stimulus that was always meant to be to support the economy, not to boost financial markets. Secretary of Defense Jim Mattis handed his resignation letter to President Trump yesterday as he is unhappy with the decision of the president to withdraw US troops from Syria. Mattis’ exit implies Trump is now only surrounded by loyalists after the departure earlier of (among others) Secretary of Foreign Affairs Rex Tillerson, former general and Secretary of State John Kelly and Secretary of Justice Jeff Sessions. Damning responses to Mattis’ resignation from leading Republican Senators like Marc Rubio show the gap between Trump and the Republican Party is growing, which doesn’t bode well for an effective and stable governing of the US in the coming period. Today is the Final reading of Q3 Gross Domestic Product, which market impact may be overshadowed by the deadline of a government shutdown-preventing budget approval in the House of Representatives at the end of the day.

CAD

2.45 metres was the World Record set by Javier Sotomayor of Cuba in the men’s high jump, something the loonie may begin to target if it doesn’t break out of its steep bearish channel. With crude prices sliding further, yesterday, the loonie continued to post losses against a broadly weakening US dollar. Today sees the release of October’s retail sales, Gross Domestic Product and the Bank of Canada’s Q4 Business outlook survey – this could see the loonie pare some losses this afternoon.