Sterling has halved yesterday’s gains this morning after Boris Johnson lost 2 points in the polls while Labour has reportedly increased support by 5 points. Comparable to sterlings recent price action, a 0.2% drop is minor. The polls will have increasing value as election day nears, but remains an unreliable predictor of the final outcome. That being said, financial markets tend to side with the outcome suggested by the polls anyway. The recent data shows the prospect of a clean-cut Tory majority has trimmed somewhat, putting the pound on the back foot. A hung parliament still remains the worst outcome for sterling as further Brexit uncertainty is likely.
The single currency has lacked volatility so far this week but the line-up of ECB speakers may breathe some life into EURUSD. The line-up of speakers begins today with Benoît Cœuré speaking in Brussels with the Governor of the Belgian central bank Pierre Wunsch. Given that the speech is on retail payments, little insight into the ECB’s policy outlook is expected, but stranger things have happened. The data calendar is again light for the euro prior to tomorrow’s speech by ECB Chief Economist Philip Lane.
The dollar is trading mixed today after fresh optimism over a trade deal ripples through markets. No significant moves have occurred just yet on any of the G10 crosses as markets have been burned before by the sharp reversal in both investor sentiment and Whitehouse commentary. Overnight, the Chinese government said it would strengthen the protection of intellectual property rights, one of the major sticking points in trade talks. This follows on from the domestic legislation passed to protect forced IP starting in 2020. The Global Times, a subsidiary of the People’s Daily in China, reported that China and the US “reached consensus” on “properly” resolving relevant issues and to stay in contact about the phase one deal. Vice Premier Liu He, Trade Representative Robert Lighthizer, and Treasury Secretary Steven Mnuchin discussed a core concerns in a call overnight, according to Beijing. Markets are still tentatively trading with the phase one trade deal in the front of their minds. Today’s data calendar includes October’s retail sales numbers, while both Fed Chairman Powell and Brainard are scheduled to speak.
The loonie continues to trade on the back foot despite the release of a positive surprise in September’s wholesale trade sales. The Canadian National Railway strike isn’t helping the loonie as it poses a serious threat to domestic growth in a time where the external climate is also pressuring the economy. While rail transport only accounts for 0.5% of Canada’s GDP, disruptions to supply chains tend to exacerbate the economic impacts. Commercial banking company TD estimated that the strikes could trim $3.1bn from the nominal GDP figures if it continues into early December. With little pencilled into the calendar, the loonie will trade on broad USD movements, US-China trade sentiment and CN rail headlines.