Currency Market Trend Analysis: October 10, 2017

By The Numbers: Your FX Week In Review

Currency Calendar

Upcoming bank holidays and impactful report releases for select countries.

Market Analysis

CAD/USD - Canadian Dollar

Opened last week at 0.8022 and closed at 0.7972.

The CAD fell by 0.62% against the USD, amid a relatively quiet week that saw softer oil prices and a widespread USD rebound. Canadian trade balance came in below expectations, sparking fears that the Canadian economy may be cooling down. The Bank of Canada still seem hawkish. The BoC Deputy Governor stated that Canadian productivity has increased greatly since mid-2016, allowing the economy to grow faster without overheating. This will be a relatively quiet week data-wish for the CAD; exchange movement will likely be sideways, with US data the main driver.

1. Thanksgiving Day: Monday, October 9^th

2. Housing Starts: Tuesday, October 10^th

GBP/USD - British Pound

Opened last week at 1.3397 and closed at 1.3065.

The sterling tumbled by 2.47% against the greenback last week, amid a downwards Q2 GDP revision, a disappointed manufacturing PMI, and a broad USD recovery. These factors were tempered slightly by the expectation that the BoE will still raise rates in November, priced in at 83%. Politics continues to weigh on the GBP, with Brexit negotiations stalling, and reports of internal struggle within the Tory Party.

This past week, the European Parliament voted 557 to 92 to postpone staring the next phase of Brexit negotiations at the EU Summit on the 19^th. May’s Speech at the Conservative Party Conference did not quell concerns about her leadership; reports suggest that Shap, former Tory Part Chair has a list of 30 Tory MP’s who want May to resign.

Many believe that the November rate hike will simply undo the post-referendum rate cut, and will not be the beginning of a longer cycle. With political concerns abound, and middling data, the GBP is providing little incentive for investment. 

1. UK Prime Minister Theresa May speech: Monday, October 9^th     

2. Retail Sales (Sep): Monday, October 9^th    

3. Production (Aug): Tuesday, October 10^th

EUR/USD - European Central Bank Euro

Opened last week at 1.1816 and closed at 1.1732.

Over the past week, the Euro depreciated by 0.71% against the USD, as politics weighed on the common currency. The German election and Catalan referendum have tested the Euro’s status as a political safe haven for those fleeing Brexit woes and US instability. In the referendum, 90% of Catalans voted for independence, an outcome that the Spanish government has rejected. EU political risk may continue to grow, with the Jamaican bloc still not established, Catalan independence talks potentially on the horizon, and the contentious Italian elections arriving in early 2018.

The Euro was also under pressure resulting from slow growth in PMI’s and retail sales data. If data continues to slow down, it could pressure on the ECB to prolong its QE program. Politics-induced depreciation was also exacerbated by US jobless claims and trade balance data that exceeded expectations, as well as renewed expectations for US tax reform. It is possible that the Catalan political fallout has not yet been fully priced into the Euro. Depreciation may occur in the short-term as this story unfolds. 

1. Eurogroup meeting (EMU): Monday, October 9^th    

2. Catalan Parliament Session (Spain): Tuesday, October 10^th    

3. Hispanic Day (Spain): Thursday, October 12^th      

4. Production (Aug): Thursday, October 12^th      

5. ECB President Draghi’s Speech (EMU): Friday, October 13^th      

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?