Thursday January 31st, 2019

Look for the USD Index to strengthen a bit today after yesterday’s drop appears a bit overdone. Yesterday the Fed announced it’s planning to keep its interest rate policy unchanged for the foreseeable future. The policy was reinforced by an unusual second announcement that monetary policy will also be adjusted to ensure economic growth. This policy change virtually assures that the USD will continue to fall, and the stock market rally. US-China trade talks are on-going. An announcement is expected shortly. Everyone wants a resolution, it’s now about the terms.

CAD rallied yesterday on the Fed news along with prices for its major exports. Today look for some weakness as CAD takes a breather. Gold, oil, base metals all rallied. Canada’s PPI is due out today. It’s been rather high at 2.8%. If it remains strong Poloz may have to raise rates further boosting CAD.

The UK parliament has given PM May an endorsement for her Brexit renegotiation plan. The major sticking point is the Irish boarder. No one wants a hard Brexit, so the market knows the EU will have to come to the table again. Sterling has rallied all month while the EUR has languished. Expect a quiet range pending a resolution.

Key Economic Numbers:                    Forecast   Previous

CAD Annual Producer Price Index            3.0%         2.8%

US Initial Jobless Claims                       215,000     199,000