Currency Market Trend Analysis: November 22, 2017
By The Numbers: Your FX Week In Review
|Date||Releases / Holiday|
|November 20, 2017||PPI (Oct)||Germany|
|November 20, 2017||ECB President Draghi’s Speech||EMU|
|November 21, 2017||Chicago Fed National Activity Index (Oct)||USA|
|November 22, 2017||Jobless claims||USA|
|November 22, 2017||FOMC minutes||USA|
|November 23, 2017||GDP (Q3)||Germany|
|November 23, 2017||Markit PMI’s (Nov)||EMU|
|November 23, 2017||GDP (Q3)||UK|
|November 23, 2017||ECB Monetary Policy Meeting Accounts||EMU|
|November 23, 2017||Thanksgiving||USA|
|November 24, 2017||IFO – Business Climate (Nov)||Germany|
|November 24, 2017||Markit PMI’s (Nov)||USA|
Upcoming bank holidays and impactful report releases for select countries.
CAD/USD - Canadian Dollar
Opened last week at 0.7870 and closed at 0.7835.
The CAD depreciated by 0.45% against the USD, despite an oil rally, as the CPI dropped as expected from 1.6% to 1.4%. This news was compounded by the 2.1% BoC forecast for 2018 GDP growth, far below the 2017’s robust 3%. In light of these projections, expectations for a BoC rate hike in January have softened from 40% to 37%.
The economic docket for Canada is extremely light this week. USD/CAD movements will likely be driven by US politics, with special attention paid to developments with US tax reform. If further developments regarding Meuller’s investigation of the Trump administration emerge, we may see slight gains for the Loonie.
GBP/USD - British Pound
Opened last week at 1.3093 and closed at 1.3213.
The sterling appreciated by 0.92% against the greenback last week, despite continuing troubles for May and Brexit, and a softer-than-expected CPI. Chief Brexit negotiator Barnier stated this past week that the UK has only two weeks to offer concession on the divorce bill, or trade talks will be delayed further, passed the December ECB meeting. Three major issues from this round still need addressing – the divorce bill amount and methodology of calculation, the North Irish border, and the rights of EU citizens. Insufficient progress has been made on all three accounts, and it seems increasingly likely that talks will be delayed further. In a positive step, sources stated the May would be willing to offer an additional 20 billion to the EU, in addition to the previously offered 18 billion, in attempt to jumpstart trade talks. Many believe that May will not hold her position long enough to see Brexit negotiations through.
The UK CPI missed the mark, falling 0.1% short of the 3.1% YoY estimate. This was balanced by retail volumes, which came in at 0.3% MoM (against a 0.1% expectation). This weeks’ movements will be driven by US politics, and the UK GDP due in Thursday.
1. GDP (Q3): Thursday, November 23rd
EUR/USD - European Central Bank Euro
Opened last week at 1.1659 and closed at 1.1792.
Over the past week, the Euro appreciated by 1.14% against the USD, as eurozone data came in very strong, but was partially countered by German political woes. EZ Q3 GDP came it as a strong 0.6% QoQ. The German GDP came in particularly strong, with 0.8% QoQ growth - the fastest growth in six years, while Italy also saw relatively strong growth at 0.5% QoQ. The Eurozone current account surplus now exceeds 3% of EZ GDP, providing further support to the Euro. The Euro was also boosted by softer-than-expected UK and Swedish inflation.
This past week, several ECB members indicated that they felt further guidance on the cessation of QE was necessary at the last ECB meeting, raising the likelihood of a definite date from the ECB.
German political stability suffered a setback, with the FDP reportedly walking out of coalition talks. This raises the likelihood of Merkel continuing with a minority government, and raises questions about her potential 4th term. This is likely to put downwards pressure on the common currency through the week.
1. PPI (Oct, Germany): Monday, November 20th
2. ECB President Draghi’s Speech: Monday, November 20th
3. GDP (Q3, Germany): Thursday, November 23rd
4. Markit PMI’s (Nov, EMU): Thursday, November 23rd
5. ECB Monetary Policy Meeting Accounts: Thursday, November 23rd
6. IFO – Business Climate (Nov): Friday, November 24th
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