USD: Dollar gains fading Cyclical currencies have stabilized overnight following their post-FOMC decline. Given the strong narrative of low US negative real rates for longer, we don’t expect periods of USD gains to be pronounced and long-lived. The recent move in oil price higher should also help cyclical FX vs USD today. Although there was no change to the OPEC+ deal yesterday, the Saudis put renewed pressure on members who are falling short of the deal, to hit compliance, as well as compensate for their lack of compliance so far (UAE already committed to make up for its previous non-compliance). Short-term, this should give support to oil exporting currencies including the CAD.
CAD: Indications are that StatsCan’s +0.7% m/m estimate for retail sales is below where the final figure will print. Most bank forecasts suggest anywhere from a 3.5% -6% monthly gain. Continued recoveries in auto sales and clothing stores should be evident in the details. USD/CAD is testing support at 1.3153, with a daily close below here shifting the focus back down to a bottom at 1.3029. Resistance is located at 1.3209 and 1.3272.
EUR: EUR/USD has been broadly trading around the 1.1850 gravity line so far this week and this trend should remain intact today, given the lack of meaningful data points and the modestly softer USD overnight. What seems a stabilizing risk environment should the currencies’ recent decline.
GBP: The BoE poured more fuel onto the GBP fire yesterday as officials signaled that the effectiveness of negative interest rates was under discussion. The increased probability of no-deal Brexit makes negative rates even more likely. We continue to see more downside to GBP as not enough risk premia is priced into the currency while the odds of further negative headline news from the (lack of) trade negotiations are high.
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