The USD and the US equity markets are slightly higher this morning as traders are focusing on the release of GDP later this morning. Third quarter GDP is expected to remain at last quarter’s 2.1% and Personal Consumption should also remain at 2.9%. Traders, for the moment, are not paying attention to Washington but rather trading the USD on its merits. After more than a year of debate, the House finally approved USMCA trade deal between the US, Canada and Mexico. The Senate is expected to pass the bill early next year. After US equity markets finished higher yesterday, DOW Futures are pointing towards a slightly higher opening later this morning of around 20 points. With the economic numbers being released ahead of the DOW opening, those numbers will influence today’s markets. The USD should end the week on a positive note.
The EUR/USD is trading lower this morning as traders await Euro Zone Consumer Confidence, which will be released later this morning. The previous indicator was -7.2 and this is expected to improve slightly to -7. Events in the US seem to be affecting the EUR as traders are sellers of the single currency. Without any surprises from the US today, the EUR should end the week lower.
As expected, the Bank of England left rates unchanged yesterday. The big news was the announcement of Andrew Bailey as the next BOE governor, replacing Mark Carney. Carney applauded the move, saying Bailey brings a strong background to the position having been a former BOE deputy governor. GBP/USD had no real reaction to this news but did move lower as Q3 GDP figures were only up slightly from 0.3% to 0.4%. Also, today is the vote in Parliament of Prime Minister Johnson’s Brexit bill. Any failure here could see the GBP move lower.
As traders move into risk trades, the USD/JPY has moved a bit higher overnight. The Japanese cabinet approved a record budget for the next fiscal year. Additionally, Japanese CPI was higher at 0.5% up from 0.4%. This is the 35th straight month of core price increases, but CPI still remains below the BOJ target of 2.0%. Japanese officials are looking at this release in a positive mood, as the index continues to rise. As traders ease away from safe haven trades, the USD/JPY should remain bid.
The Canadian dollar is slightly weaker this morning as despite oil prices moving a bit higher overnight. Canadian retail sales are expected to improve 0.5%, as stronger motor vehicle sales lead the move. As with the other currencies, the CAD is taking a backseat to a higher USD as the week concludes.
According to US Treasury Secretary Mnuchin the Phase One trade deal between the US and China is in the process of technical and legal review and should be ready for signing in early January. After all the delays leading up to this agreement, there are still some skeptics in the market expecting a problem with the trade deal. To this point, markets have “priced in” the de-escalation of the trade war but concerns remain regarding possible technical restrictions that the US may impose on China moving forward.