- US President criticises Federal Reserve for rate hike plans
- Bank of Canada rate hike expected
By David Johnson
A decline in German Purchasing Managers’ Indices (PMIs) for the service and manufacturing industries hit the Euro this morning. The composite index was the worst performing. Well, that, plus the ongoing disagreement between Italy and the EU over Italian plans to exceed the Eurozone budget deficit rules. Italy’s debt to Gross Domestic Product (GDP) ratio is 135%, so it is a big issue over stability and future problems.
Sterling stuck despite Euro’s fall
Were it not for the Brexit issues, Sterling would have ramped up against the Euro, but it is still trapped around €1.13 and just below $1.30. At the time of writing, we are awaiting UK mortgage approvals data, which is expected to be a tad down on the previous month. I doubt it will feature in Sterling’s activity if that is the case; there are too many other factors in play.
No diplomacy for the Dollar…
And President Trump has been criticising the Federal Reserve’s keenness to raise interest rates. The President said it is too early to tell, but maybe he regrets nominating Federal Reserve Chairman Powell. Just in case you hadn’t noticed, Trump has no diplomatic experience. The US Dollar remains strong ahead of this afternoon’s US PMIs. The forecasts are for small declines in the indices and that could allow the Pound to creep back above $1.30 and the Euro-USD rate to push up towards $1.15. In addition to the PMIs, we will get a couple of speakers from the Federal Reserve and the release of their Beige Book, a regional view of the state of the US economy and an important indicator for the markets.
Canada could raise interest rates – will it strengthen the CAD?
The other news this afternoon is the expected interest rate hike from the Bank of Canada (BoC). The forecast is for a hike from 1.5% to 1.75% in the BoC’s benchmark rate and we will get a statement and monetary policy report to explain whatever decision they make. The Canadian Dollar could well strengthen ahead of this announcement, but it would appear much of the expectation is priced into the CAD already. If they do hike the rate, it will be the first time the base rate has been there since 2008.
New Zealand Dollar could strengthen overnight – be prepared
Overnight tonight, we expect to see a narrowing of New Zealand’s trade deficit and that has the propensity to strengthen the Kiwi Dollar, so please don’t get caught out by that if you are a New Zealand Dollar buyer.
The best way to spread Christmas cheer?
And Lapland Safaris are hiring elves to guide visitors and to help them travel around the country whilst spreading joy and happiness. Rumours that you’ll have to pass through the seven levels of the Candy Cane forest, through the sea of swirly twirly gum drops, and then walk through the Lincoln Tunnel have not been confirmed.