Thursday February 14th, 2019

The US$ strength appears unstoppable this morning continuing an eleven day rally, and approaching new highs, on news that the Administration is granting a two-month extension to the China tariff deadline. The market is hopeful the Administrations softening stance is a sign of resolution in the trade war. Market direction will be hard to predict today given the many economic numbers due, however some weakness after such a strong rally is likely.

The C$ is weaker this morning despite three days of strength in oil prices. The major issue is the continued public pressure on the government over ethics scandals and a weak economic outlook. Today the New House Price Index numbers will be announced. House prices have risen steadily since 2010 but have flatlined over the last six months. Historically, declines in house prices have been a signal for recessions. If housing prices are down today look for further weakness.

The EUR also continues to weaken and is approaching a new two year low. A test of this low is likely within days. Political divisions seem to be everywhere, including Spain’s trial of Catalan separatists, Italy’s budget disagreements with Brussel’s, France’s Yellow Vest movement, and Brexit are all hindering investment confidence.

Key Economic Numbers:                    Forecast   Previous

New Housing Prices Year-to-Year (Dec)   0%            0%

US Initial Jobless Claims (Feb)               225,000     234,000

US Producer Price Index (Jan)                2.3%         2.5%

US Retail Sales Year-to-Year (Dec)         4.5%         4.2%

 

Drummond Gill