Currency Market Trend Analysis: November 13, 2017

Ryan November 13th, 2017

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By The Numbers: Your FX Week In Review

Foreign currency value versus USD is decreasing

Foreign currency value versus USD is increasing

*Indicators show the percent change over the past week.

Currency Calendar

Date	Releases / Holiday
November 13, 2017	Remembrance Day	Canada
November 13, 2017	FOMC Member Harker Speech	USA
November 14, 2017	Harmonized Index of Consumer Prices (Oct)	Germany
November 14, 2017	Price Indexes (Oct)	UK
November 14, 2017	Fed’s Yellen Speech	USA
November 14, 2017	BoE’s Governor Carney Speech	UK
November 14, 2017	GDP (Q3)	EMU
November 14, 2017	ECB’s President Draghi’s Speech	EMU
November 15, 2017	Retail Sales (Oct)	USA
November 15, 2017	CPI (Oct)	USA
November 16, 2017	CPI (Oct)	EMU
November 16, 2017	BoE’s Governor Carney Speech	UK
November 16, 2017	BoC Review	Canada
November 17, 2017	ECB President Draghi’s Speech	EMU
November 17, 2017	CPI (Oct)	Canada

Upcoming bank holidays and impactful report releases for select countries.

Market Analysis

CAD/USD - Canadian Dollar

Opened last week at 0.7838 and closed at 0.7870.

The CAD appreciated by 0.41% against the USD, as the Canadian Ivey Purchasing Managers Index surprised to the upside, crude rallied, and US tax reform suffered a setback. The Loonie suffered early in the week as crude fell, but rebounded after the Nigerian oil minister stated that Nigeria would support an extension of a deal to cut oil supply until the end of 2018. Further support was found in the Ivey Purchasing Managers Index, which rose from 59.6 to 63.8. US tax reform also contributed to Loonie appreciation, with the announcement that US corporate tax cuts will be delayed until 2019.

BoC Governor Poloz stated this past week that the bank will proceed cautiously on future rate hikes. Markets currently expect the next rate hike to occur in January, with an additional hike to follow in 2018. Overall, Canadian data has been softening, but this may be payback from a very strong Q2 and Q3. This will be relatively quiet week data-wise for the CAD, with fallout from the US tax reform announcement and the Canadian CPI acting as the main drivers. Sideways trading is likely.

Remembrance Day (Oct): Monday, November 13^th
BoC Review: Thursday, November 16^th
CPI (Oct): Friday, November 17^th

GBP/USD - British Pound

Opened last week at 1.3078 and closed at 1.3093.

The sterling appreciated by 0.12% against the greenback last week, riding US weakness driven by tax reform delays. Politics continues to weigh on the Sterling, with renewed attacks on May’s leadership. International Development Secretary Patel resigned amid controversy involving unauthorized meetings with senior Israeli politicians. Subsequently, 40 members of the Tori party signed a no-confidence letter in May - 8 votes shy of the # needed to replace her. This does not bode well for the already beleaguered Brexit negotiations, with public confidence in May’s ability to strike a Brexit deal hitting a new low.

There are three rounds of Brexit negotiations left before Decembers’ EU summit, in which EU leaders will decide if sufficient progress has been made to move on to the next phase of Brexit negotiations. To pass this check, the significant progress must be made on the issues of the N. Ireland border, divorce settlements, and rights of EU citizens. An agreement on the methodology for calculating the UK’s liability would go a long way towards expediting negotiations.

UK data continues to offer little incentive for the Sterling. UK economy is predicted to grow by 1.3% in 2018, down from 1.8% in 2017, assuming that the EU trade relationship remains unchanged. The 3-year market-implied BoE policy rates currently sits at 1.00%. If the UK price indexes come in above expectation, we could see some slight appreciation driven by improved rate hike expectations. Otherwise, politics will likely be the main driver of GBP movements.

Price Indexes (Oct): Tuesday, November 14^th
BoE’s Governor Carney Speech: Tuesday, November 14^th
BoE’s Governor Carney Speech: Thursday, November 16^th

EUR/USD - European Central Bank Euro

Opened last week at 1.1613 and closed at 1.1659.

Over the past week, the Euro appreciated by 0.40% against the USD, as data continues to come in strong, and US tax reform suffered a setback. German and French production figures were solid, and the Eurozone service PMI rose from 54.9 to 50.0, while Spanish service PMI fell to 54.6 from 56.7 due to Catalonia-driven uncertainty. ECB Executive Board Member Praet stated this past week that inflationary risks have disappeared, and some measures of underlying inflation have improved. This weeks’ movements will be driven by European GDP and CPI figures, with slight appreciation likely.

Harmonized Index of Consumer Prices (Oct, Germany): Tuesday, November 14^th
GDP (Q3, EMU): Tuesday, November 14^th
ECB’s President Draghi’s Speech: Tuesday, November 14^th
CPI (Oct): Thursday, November 16^th
ECB’s President Draghi’s Speech: Friday, November 17^th

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About the Author

Collin McAliley - Financial Analyst

Collin educates corporate clients on foreign currency markets lending industry best practices that enhance client knowledge and create specialized solutions that fit each business. Interested in having a custom international payments strategy or foreign exchange risk plan?

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