Euro Picks Up Steam, Buck Down as Trade Talks Start


Euro Picks Up Steam, Buck Down as Trade Talks Start

OCTOBER 10, 2019

The U.S. Dollar is down against most counterparts with Euro and others advancing by over half a percent based on optimism over China’s trade negotiating team visit to Washington, DC.


Overall, the buck seems to be at its weakest level in a month across the board according to some basket gauges. Global markets hope that if the trade is resolved, the slowdown in worldwide manufacturing can come to an end. Contractions in different countries are cause for concern, but at the moment all eyes are on U.S.-China changing to a friendlier stance as Bloomberg reported that President Donald Trump may suspend planned tariffs scheduled for next week and allow Huawei room to get suppliers.

On our side, inflation in the form of the Consumer Price Index revealed a slower pace of expansion at 1.7% instead of 1.8% as estimated. Any sign of missed forecasts will play into the hands of the Fed’s plans to cut interest rates further to prevent recessionary pressures. Fed Chairman Jerome Powell defended the Fed’s actions yesterday during a discussion and believes that the recent Repo issues in which the Fed has had to help with liquidity are not equivalent to quantitative easing. Thus far, the guidance is regressing the dollar.

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The Euro is up although mixed indicators throw some concern over the health of the major economies. France’s Industrial Production was supposed to expand by 0.3% but instead dropped by (-0.9%) indicating that the second-largest economy of the bloc is having similar contractions to Germany. Surprisingly, Italy’s measure came in stronger than expected at 0.3% over the 0.1% estimate. While news about trade will dictate the economic path of the bloc, it seems like individually some are flourishing while others flounder. We believe the Euro has room to grow if all lines up towards the bigger economies coming out of a slowdown.


The Canadian Dollar remains in tight ranges ahead of elections coming on October 21st. Although campaigning is heated as Justin Trudeau tries to stay in power, the likelihood of a conservative win could push the “Loonie” higher. Analysts see that if a new government is more pro-business and pushes for the USMCA to be implemented, the Canadian Dollar could indeed see a benefit since slow economic growth has pushed it down allowing with trade woes.  We shall see if indeed Trudeau leaves this term, but we consider the CAD likely to gain as its central bank separates itself from others as it refuses to lower interest rates