The U.S. Dollar is trading in an upward trend considering a very pessimistic overnight session that saw statements from officials that pointed at the difficulty of reaching consensus on trade.
On the Brexit end, talks between EU’s chief negotiator Michel Barnier and the U.K. Attorney General were kept private and no notes were shared of the discussion, a sign that perhaps no progress is in sight and next week will end in defeat for Prime Minister Theresa May without new concessions to show to Parliament as they vote on her supposedly amended deal.
Furthermore, a former Chinese finance minister, Lou Jiwei, explained that China’s government will not be willing to concede much in negotiations and primarily want tariffs to be taken away. The lack of confidence is keeping markets stagnant and it is starting to manifest itself in weakened indicators globally. Such is the case that outlooks and forecasts on global growth keep on being downgraded. Labor markets continue to be strong with ADP Employment close to meeting its 190K target at 183K. At the moment, risk-aversion is leading to the greenback playing safe-haven.
What to Watch Today…
- No major events scheduled today.
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The Bank of Canada is set to reveal its decision at 10AM, in which BOC Governor Steve Poloz is expected to maintain caution and address the contraction in economic growth in December as well as the worrying housing market with prices falling and demand contracting.
Domestically, the Canadian economy is stagnant, but a report recently also highlighted the country’s superiority in combating poverty in comparison to other advanced nations. We see room for “Loonie” strengthening, but it will be towards second half of the year with hopeful ratification of the USMCA, a return to growth, and oil prices stabilizing.
The Pound stayed mostly put, but news on Brexit and the economy seem to reveal that plans for a “no-deal” scenario may need tom stay in place. Bank of England Mark Carney said the country is more prepared than before to deal with a “no deal” case, but that the effects are likely to be dire and long-felt with its unprecedented nature.
The bank could increase interest rates down the line to primarily fight inflation arising from a lack of goods begin supplied under the single market. The EU is not going to reverse its deal and terms, which could ultimately mean no deal achieved by May. If a delay is announced, be sure that Sterling will return to gains.