After paring back the brief gains it saw off the back of Monday’s political developments, sterling joined the majority of the G10 currencies in trading flat yesterday. Labour market data for the third quarter showed a continued fall in net employment, while wage growth slowed slightly to 3.6% year on year. Despite the overall fall in net employment, the unemployment rate fell to 3.8% due to changes in participation. The UK general election campaign continues, with fresh spending pledges coming daily. Yesterday the Labour Party promised to outspend the Conservatives in NHS spending, although with both parties promising a historic loosening in fiscal policy, it seems something of a moot point.
The euro continued to drift lower against the US dollar yesterday, reaching its lowest point since mid-October. The results of the November Sentix Economic Sentiment survey of investors and analysts were mixed. The index tracking respondents assessment of the current economic situation in Germany remained near the nine year lows seen in October. But the subindex tracking expectations of future performance rose again, reaching -2.1, continuing a rapid improvement from October’s doom-laden lows of -44.1. Eurozone Industrial Production figures will be released at 10:00 GMT.
Price action was fairly muted in G10 FX again yesterday despite threats by President Trump to substantially raise tariffs on China if a phase one deal is not completed at the Economic Club in New York. The narrow trade deal, which was announced back in early October by the Trump administration, is seemingly not as close to the final stages as was previously suggested. Both parties have been struggling to reach a consensus not only on the location of where it will be signed but also if Washington will roll back prior tariffs. The US dollar continues to firm against the G10, but the moves are minor compared to the price action seen over the past few weeks. US Treasury yields are paring recent gains on the negative trade headlines this morning, while the Swiss franc is also trading in the green. Today, the CPI measure of inflation is released for October, but will likely be brushed to the side as it is not the Fed’s preferred inflation measure and no fireworks are expected.
The loonie traded flat yesterday as oil traded lower. The moves are all minor in a wider scope, and USDCAD continues to trade higher this morning. The catalyst for the move looks to be related to the fall in oil prices for the third consecutive day after negative trade headlines from Trump last night. Today sees the release of the EIA inventory report, which has put substantial pressure on oil markets over the last two week’s with substantial builds in inventories, suggesting further CAD downside may be on the cards.