U.S. Dollar mostly flat, FX fluctuations quiet

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The U.S. Dollar is trading in tight ranges following a quiet Monday. Currently live, Prime Minister Theresa May is speaking in front of Parliament arguing her points on her Brexit deal and why the votes should go in favor of a soft landing within the framework that the EU has agreed upon.

Overview

<pPound/greenback pair could be very volatile as fourteen amendments are up decided on. Both Euro and Sterling have seen better fortunes in January based on the idea that Brexit will not occur without a trade pact in place>

U.S. and Chinese trading decision-makers will meet in the next two days to discuss a way to resolve the tariff impasse between the world’s two largest economies. Concerns that China’s economy is slowing down to uncomfortable levels may play a role in President Xi Jinping and Vice Premier Liu He’s attempts to speed up a solution when they see U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin tomorrow and Thursday.

What to Watch Today…

  • No major events scheduled for today.

CAD

The “Loonie” is up by 2.8% thus far this year after a month in which it was established that oil and energy prices may start heading up with WTI Crude already having jumped by 15.0%. Chances of the Bank of Canada raising interest rates this year by the July 10th meeting stand at 32.0%, but speculation on monetary policy is not the only possible driver of CAD value.

With trade negotiations reaching a more serious and urgent tone between China and the U.S. eases pressures on the Canadian economy, highly dependent on good relations with Asia. Additionally killing off one trade issue will help in facing the other one: the lack of pace of ratifying the USMC trade pact (NAFTA 2.0).

GBP

The Pound is up for 2019 and we believe it can gain further ground as the year moves forward, but today will determine if appreciation will be rapid or not. Theresa May will have to roll with the punches as she has throughout this whole process, but sending her back to Brussels may not guarantee any changes to what she has already presented. We still think we are slowly moving towards a second referendum and that everything will be exhausted in delaying the deadline for Brexit in order to exercise this option.

 

The lawmakers will have the chance to discuss and vote on amendments to May’s “Plan B.” The markets think either a deal will somehow be reached or a referendum will be called upon, thus rewarding Sterling’s value since a “no-deal” scenario seems more unlikely now.

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