Thursday February 28th, 2019

The US$ fell to a new three-week low overnight on news of a lack of success in North Korean nuclear security talks. As well Wholesale Inventories increased to a five-year high yesterday, while Factory Orders fell providing the market with recessionary fears. The market will have confirmation of those concerns today when 4th Quarter 2018 GDP growth will be reported. 3rd Quarter GDP growth was very strong at 3.4%, but with weakening numbers a more modest GDP of 2.6% is not a surprise. A higher GDP number will drive some US$ strength today. More North Korean talks are scheduled for today that should also help US$ higher.

The C$ is lower on news that Canadian inflation is well below the Bank of Canada’s target at 1.4%. The BoC will make its next rate announcement on March 6th and the market is expecting no change given that news. The Government Opposition is demanding the Prime Minister resign due to testimony the Government committed ethics violations. The Prime Minister has denied the claims but is facing a steeper uphill battle going into the next election. Look for further weakness today.

The EUR has rallied overnight supposedly on news of stronger Swiss economic sentiment. The market is looking for any hope that Europe is turning a corner, but typically Swiss Franc strength reflects a flight to safety, in this case probably on the failure in North Korea talks. This rally should be a selling opportunity.

Key Economic Numbers:                    Forecast   Previous

CAD Producer Prices Yearly (Jan)            +2.1%       +2.2%

US GDP Growth (4th Q)                         +2.5%       +3.4%

US Initial Jobless Claims (Feb)               240,000     216,000

 

  • Drummond Gill