The USD is ending the week on a higher note after strong US retail sales data was released yesterday. US retail sales increased for a third straight month in December and the USD was also aided by weekly jobless claims which fell for the fifth straight week, indicating a strong labor market. This news has brought the US equity markets to new highs and DOW Futures this morning indicate an opening of around 70 points higher later today. The Senate approved the USMCA (US-Mexico-Canada) trade agreement yesterday and the bill will now go to the President for signing. Canada now has to ratify the agreement, and this should happen when the Canadian Parliament returns on January 27.
The EUR/USD remains in a quiet overnight trading range. EU Commissioner for Trade, Phil Hogan, speaking at a conference in Washington DC, said that President Trump is obsessed with the US trade deficit with Europe. He was also critical of the US-China trade agreement which includes Chinese commitments to buy US goods. This could be considered a violation of international commerce rules and may end up being heard by the World Trade Organization. Mr. Hogan is in Washington to discuss trade as President Trump has threatened tariffs against the EU countries.
GBP/USD remains under pressure as we end the trading week, with UK retail sales for December coming in at -0.6% much lower than the increase that was expected. Adding to the GBP’s woes was a downward revision to November’s numbers. As economic numbers from Great Britain continue to disappoint, all eyes are on the Bank of England which is now expected to cut rates later this month.
Traders continue to exit safe haven trades, feeling more confident at adding risk, which has the USD/JPY reaching levels not seen since May of 2019. Confidence over trade as well as strong equity markets across Asia, Europe, and the US has seen traders gain further confidence in taking on risk. Expect the trend in USD/JPY to continue as the trading week concludes, and we should see new highs in USD/JPY by the end of today.
USD/CAD trading range has been quite overnight, as traders prepare for the Bank of Canada meeting next week. Market analysts expect the “bullish” sentiment to continue as global economic expectations have improved after the US-China trade agreement. Oil prices will continue to impact commodity currencies such as the Canadian Dollar, as the correlation between oil and loonie remains strong.
China released its Q4 GDP and it grew by 6.0% y-o-y, which matched market expectations. Overall growth for 2019 slowed to 6.1%, which was down from the 2018 number of 6.6%. This is the slowest annual growth since 1990. Markets are expected to rebound following the trade agreement, should improve if tariffs are removed going forward as expected.