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By xemarketanalysis January 22, 2019 2:06 pm
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    XE Market Analysis: Commodity Currencies See Red as Global Sentiment Turns Negative.

    OVERVIEW

    • The US Dollar Index keeps apparent calm despite the prolonged government shutdown 
    • The IMF downgrades its forecast for global economic growth, fuelling risk-off trades and equity markets selloffs
    • NYMEX WTI Crude is under pressure, sinking down around 2.7%, and fails to move above a five-week high

    HIGHLIGHT

    The Canadian dollar tumbled to a two-week low as a combination of low oil prices, disappointing economic data and the fear of a global slowdown weighs on investors' enthusiasm for the CAD. The loonie is down nearly 0.4% year-to-date. Data released this morning showed manufacturing sales are slowing down. Falling oil prices will also add additional pressure on the local energy sector despite investment efforts from the provincial government in Alberta. We expect the pair to trade with a bearish tone with the market eyeing the critical 1.34 level.

    US DOLLAR

    Commodity currencies are under pressure this morning amidst falling oil prices and flaring tensions between the US and China over the growing predictions of the extradition of the CFO of Huawei Technologies from Canada. The NOK is leading the race to the bottom, dropping nearly 0.5% as we enter the North American session. NYMEX oil futures is down 2.10% to trade near $52.65 a barrel, losing momentum after touching a five-week high earlier today. US market reopens after an extended weekend, still finding government hit with the prolonged partial shutdown. We have second-tier economic data on the dockets and we expect currency markets to tread the waters cautiously.

    BRITISH POUND

    The British Pound is trading with a positive bias after the latest data showed the UK economy is resilient with strong jobs numbers. Most recent estimates showed average weekly earnings in real terms rose by 1.1% and the unemployment rate now sits at 4.0%. It's the UK's lowest unemployment level since 1975. However, the Sterling will likely remain volatile over Brexit uncertainty. The UK Parliament is expected to cast another vote on PM May’s Plan B next week, and another defeat will probably generate more chaos for the business community. Since June 2016 when British citizens voted to leave the EU, the pound has fallen nearly 13% and remains at the mercy of the ongoing trials and tribulations of an exit plan.

    EURO

    EUR/USD continues to drive southward on the comparison charts and is down 0.2% as data out of the old continent fails to impress investors. The ZEW Indicator for Economic Sentiment for Germany recorded a slight improvement but remains in negative territory and below long term average. Global economic slowdown and uncertainty over Brexit are likely to push the ECB to stick to its current accommodative monetary policy. We expect the market to adopt the proverbial “wait and watch” stance ahead of the Governing Council meeting this January 24th. 

    CANADIAN DOLLAR

    The Canadian dollar weakened towards the mid-point of 1.33 against the greenback following losses in WTI crude oil and poor manufacturing sales numbers. USD/CAD jumped to an 11-day high after Canadian manufacturing sales declined 1.4% in November, making it the industry's second successive monthly decrease. Sales were down in 13 out of the 21 manufacturing segments tracking the data. The pair is expected to trade with a bullish push with an important 1.34 high in sight.

    AUSTRALIAN DOLLAR

    AUD/USD is trading in negative territory, down 0.17% on the day. The Aussie came under pressure after conflicting reports on no to little progress on US-China trade talks. Meanwhile, HIA New Home Sales fell by 6.7%, its lowest level since late-2012. Recent credit tightening rules have been a major factor contributing to the market slipping into “contractionary phase”.

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