Monday, January 7th, 2019

The Dollar Index is down for the third day in a row following sentiment that the Fed will be easing its rate hike cycle for the coming year. Powell & Co. has been adamant that future rate hikes would be data dependant, however despite strong Nonfarm Payroll (312k vs 184k) numbers last week, the Fed is pumping the breaks on their outlook. Powell also mentioned that the Fed is not on a predetermined path to rate hikes and will be cognizant of global market risks. The US and China have begun two days of trade talks in Beijing following Friday’s announcement of new stimulus measures from the Chinese to address the current economic slowdown. CAD has benefited off of broad Dollar weakness, reversing the 3% onslaught it faced prior to the holidays. Canada also saw favourable employment data on Friday with the Unemployment Rate (5.6% vs 5.7%) and Net Change in Employment (9.3k vs 10.0k) being released. The BoC will see an interest rate decision on Wednesday, where expectations are that Poloz will hold rates.

EUR is strong against the Dollar, taking advantage of the broad weakness out of the US. A quiet week ahead for the EUR as there is no primary data scheduled for release. Sterling continues to tread water ahead of a Parliamentary Brexit vote next week. Upside seems to be limited for the Pound, unless an agreement can be reached with the EU. The calendar isn’t littered with UK releases either, limiting chances of an economic data based rally.

The calendar for the week is US heavy with US ISM Non-Manufacturing (58.5 vs 60.7) slated for release this morning, Advanced Goods Trade Balance (-$76.0b vs -$77.2b) on Tuesday, the FOMC Minutes on Wednesday, A Powell Speech on Thursday and CPI (1.9% vs 2.2%) on Friday to round out the week. The BoC has a rate decision on Wednesday and Carney will host questions in London later in the day.