Sterling has extended its rally this morning, reaching its strongest levels against the US dollar since May. Political polls continue to show the Conservatives enjoying a commanding lead, and betting markets this morning are trading the likelihood of a Tory majority with an implied probability of roughly 70%. Leaders gathered in London ahead of this week’s NATO summit. The photo opportunity proceeded without much sterling relevant news, as Boris Johnson appears set on avoiding too much media attention on any contact with Donald Trump. Johnson did, however, make comments yesterday in support of a digital sales tax. A similar tax in France has caused threats of tariffs by the US. This morning’s data will include Markit’s Purchasing Managers’ Index for the services sector, following equivalent releases for Manufacturing and Construction earlier in the week. The Index will be released at 09:30 GMT.


After a sharp rally on Monday, the euro consolidated its gains yesterday, still managing to close slightly higher against the US dollar. Tensions between Emmanuel Macron and Donald Trump were in focus during yesterday’s NATO summit, with the US President criticising his French equivalent for his allegations that the military alliance was suffering “brain death”. The US has threatened to implement sanctions on French imports in retaliation for France’s Digital Services tax. As today’s formal NATO talks start today, any further rifts between the US and Europe will be under the spotlight. This morning has already seen final releases for October Services Purchasing Managers Indices. The figures were positive on the whole, with Eurozone wide Services PMI rising to 51.9, better than expected.


The broad dollar regained some momentum over the past 24 hours, as Donald Trump said that he was comfortable with waiting until after the 2020 presidential election to strike a trade deal with China. Elsewhere, the House of Representatives voted in favour of legislation imposing sanctions on Chinese officials over human rights abuses against Muslim minorities, another potential source of escalation in trade tensions. Tariffs on consumer goods are due to go up on December 15th, and if imposed will carry further costs for the US and global economy. Bloomberg is reporting this morning that “people familiar” with US-China talks believe both sides are moving closer to a deal, despite the heated rhetoric. Today at 13:15 GMT ADP’s estimate of Non-Farm Payrolls will be released, followed by services survey data from Markit and ISM at 14:45 and 15:00 respectively.


The loonie is lower marginally this morning, ahead of today’s Bank of Canada decision. Although no change in interest rates is expected, there is considerable scope for loonie volatility depending on the signal the Bank chooses to give about policy in 2020. The domestic Canadian economy remains in fairly good shape, but international conditions remain under a cloud of uncertainty from US trade policy, so the rate statement is likely to be fairly cautious. October’s rate statement noted a weakening global outlook and promised that the BOC would pay “close attention” to consumer spending and housing market in Canada’s economy. Housing starts shrunk sharply in October, but core retail sales beat expectations. The Bank of Canada’s rate decision will be released at 15:00 GMT.



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