Brexit noise sinks the pound and euro, but other currencies gain vs the dollar
The US dollar is stronger for a second day as the British pound and euro weakness helps the greenback. Canada gets confirmation that inflation is firming, giving lift to the loonie. Record high equity markets in India help the rupee while China sets the renminbi daily fix at 7 where it will likely stay for the rest of the year.
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December 18, 2019
EUR/USD 1.1119 GBP/USD 1.3083 USD/CAD 1.3129 AUD/USD 0.6851 USD/JPY 109.55 USD/CNH 7.0045 USD/ILS 3.5007 USD/MXN 18.9545 USD/CHF 0.9809 USD/INR 70.9970
The dollar strengthened in early trading mostly on pound and euro weakness. Financial markets try to distill the noise of Trump impeachment, and will be watching proceedings today. Yesterday’s strong Industrial Production figures helped the dollar and seem to confirm to the financial markets that the Fed will not be raising rates in 2020.GBP
The pound has continued to weaken and has now lost 3% vs. the US dollar since the Boris Johnson election victory last week. Brexit concerns reemerged after Johnson announced no extension to the transition time frame after the January 31 exit. Positive sentiment around the S&P credit rating agency upgrading UK credit rating to stable was overshadowed by an increased chance the BOE will have to cut their overnight benchmark rate in 2020 to encourage economic growth.EUR
The euro is weaker today despite German Business sentiment index (IFO) coming in stronger than expected for December. EU Brexit negotiator Michel Barnier has reportedly said that he will prioritize achieving a trade deal with the UK before the deadline; however, it will be difficult to achieve in the time frame set.CAD
The Canadian dollar strengthened after November’s inflation readings confirmed the highest rate (2.2%) in 10 years. Although some of the inflation components are considered transitory, the November readings confirm the Bank of Canada will not be cutting rates anytime soon.ASIA/PACIFIC
The Japanese yen gained as some FX traders moved to the sidelines as year-end gets near. Bank of Japan meets tomorrow.
The Chinese renminbi has settled into a very tight trading range at 7 flat. Chinese monetary authorities are expected to add liquidity to markets, just as the Fed does in the US, to keep liquidity markets functioning over year-end.