The Conservative party manifesto was released over the weekend and was deemed “sensible” by the incumbent Prime Minister. The manifesto avoided any controversial policies, which were arguably the downfall of Theresa May’s majority in the House of Commons last time around. The PM vowed to hire 50,000 extra NHS nurses, cut taxes and finalise Brexit before the January deadline. The pound is marginally higher this morning, but that cannot be attributed to the manifesto release over the weekend as the election remains too far out for financial markets to begin showing a clear bias towards an outcome. The pound’s resurgence is more likely due to a softer dollar this morning and the fact that it was trading close to the lower bound of its recent trading range last week. Goldman Sachs and Blackrock have both touted the pound as 2020’s top trade if Johnson wins and pushes through a Brexit deal, however. The data calendar is void of top-tier releases this week for the pound.


The single currency starts this week lightly after selling off on Friday post-US PMI release. The calendar is wedged full with ECB speakers this week, the most notable being multiple speeches from Chief Economist Lane. The ECB is now the premier pressure group advocating for looser fiscal policy following commentary from President Lagarde last week. The Eurozone data calendar this week is brimmed with PMI releases, while Germany is set to release CPI inflation data on Thursday.


The dollar made broad inroads against most of the G10 last week, with only JPY and NZD advancing while SEK sat flat. Trade headlines continue to be the dominating force with little value added in the FOMC meeting minutes released last week. The Fed remains in focus this week with Chairman Jerome Powell set to speak on Tuesday. The Fed’s Chair of the Committee on Financial Stability, Lael Brainard, is scheduled to discuss the Fed’s policy framework review that day, while the central bank’s measures of economic performance are released in the latest beige book on Wednesday. Joining the release of the beige book on Wednesday is the second reading of Q3 GDP at 13:30 GMT with October’s PCE inflation data released shortly afterwards at 15:00 GMT. The trade war continues to be the overarching woe in financial markets, with headlines focusing on the agreement of the narrow trade deal and whether December’s tariff increase will be bypassed. This morning, the Global Times, a Chinese newspaper under the People’s Daily, tweeted that China and the US are “very close” to reaching a phase one agreement. The tweet cites unidentified experts close to the Chinese government and has sent the dollar mildly lower at the start of the day.


The loonie fell 0.59% against the dollar over the course of the last week. The main impetus for the weakness was dovish comments from BoC deputy governor Carolyn Wilkins. Neutral undertones from governor Poloz later on in the week coupled with another firm reading of inflation data failed to stimulate the loonie enough to regain the lost ground. This week, Q3 GDP data is released on Friday with a substantial drop from Q2 expected. Growth in the second quarter was driven by a rebound in oil prices and economic conditions so the fall from 3.7% annualised growth doesn’t come as a surprise. The median forecast supplied to Bloomberg expects growth to come in at 1.3%.



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