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August

Canada concessions in US trade talks rumoured - CAD strengthens

Published: Wednesday 29 August 2018

  • Germany planning bailout for Turkey?
  • US Gross Domestic Product data awaited
​​​​By David Johnson

Having seen the US and Mexico reach a number of agreements on trade, Canada is now at the negotiating table with America to try to wrest some kind of agreement out of the remains of the North American Free Trade Agreement (NAFTA). The rumours this morning are that Canada is prepared to make some concessions on dairy products and that could accelerate the negotiations. The Sterling - Canadian Dollar exchange rate is down to C$1.66, a level that, other than earlier in August, we last saw in November 2017. Tomorrow’s Canadian economic growth data is the key for the latter part of the week – always assuming nothing is announced on a Trade deal with the US.
 
Pound under pressure
 
Sterling is under pressure across the board as it tests €1.10 and is stumped at $1.2850. News that the deadline for agreeing a deal between the UK and EU has been shunted into mid-November did nothing to support the Pound. However, there are problems for the Eurozone that may weigh on the shared currency in the weeks ahead. Germany is talking about a bailout plan for Turkey, for fear of Turkey’s problems infecting the Eurozone. German banks in particular have large exposures in Turkey, so that fear of contagion is a real one.
 
Mixed signals for USD
 
The US Dollar is having a mixed time right now. Yesterday’s release of a very strong Consumer Confidence Index did support the USD, but there is still a conflict in many traders’ minds over whether Trump is a twisted genius, or just deranged. This afternoon’s US Gross Domestic Product (GDP) data will be important for USD movements today. Anything less than 4.0% on an annualised basis will cause some US Dollar weakness. Most likely anything above 4.1% will boost the USD. We are also expecting pending home sales data, which is expected to be quite poor, so any gains – if that is what happens – in the value of the USD may be muted until we see that information.
 
Cor blimey, Mary Poppins!
 
And on this day in 1964, the Walt Disney film, Mary Poppins, was released. And thus, the worst cockney accent of all time was unleashed on an unsuspecting audience. Cor Bloymey Meery.
Gentleman
 
A London gent gets a bespoke suit made for him by a tailor in Saville Row and it is beautiful. The best he has ever owned, in fact. He realises, though, a month or so after collecting the suit, that he has not been invoiced.
 
He pops into the tailors and asks why they haven’t billed him for the suit. The Master Tailor says,
 
“We could never ask a Gentleman for money, Sir.”
 
“Well, how do you ever get paid?” asks the gent.
 
“Well, Sir,” says the Master Tailor, “If the client does not come forward to pay us for our services, we realise he is, in fact, not a gentleman after all and then we ask him for payment.”

Today's Major Economic Releases

Market BST Data/Event Previous Expected
CAD 13:30 Canada: Current Account -19.5b -15.3b
USD 13:30 US: Preliminary Gross Domestic Product 4.1% 4.0%
USD 13:30 US: Preliminary Gross Domestic Product Price Index 3.0% 3.0%
USD 15:00 US: Pending Home Sales 0.9% 0.3%
USD 15:30 US: Crude Oil Inventories -5.8m -0.7m
NZD 23:45 New Zealand: Building Consents -7.6% -7.6%

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