Wednesday February 27th, 2019

The US$ fell to new two-week lows yesterday and remains weak this morning on news of a collapse in Housing Starts. Also, Fed Chair Powell’s speech before Congress reiterated his low interest rate policy. Look for further weakness as Powell will also speak before the House finance committee today. More economic numbers are due today to provide more market worry, especially Wholesale Inventories, which have been trending higher, while Factory Orders have been declining. If these numbers continue weak as expected the US$ will decline further today.

The C$ is approaching new high’s on a recovery in oil prices and strong base metals. Canada is announcing important inflation numbers today. In the last six months inflation has been subdued and the market is expecting more of the same. Oddly, despite weak economic numbers almost everywhere in the world commodity prices continue to show strength. Either there is a hidden economic engine somewhere, perhaps China, or the numbers are missing underlying growth which are only showing up in jobs figures. If oil remains strong the C$ might hit a new three-week high today.

The GBP has hit a new six month high this morning rallying almost 4% over the last two weeks, while the EUR languishes, on the belief that a “No Deal” Brexit deal will be eventually be finalized. Prime Minister May will announce new Brexit proposals today in Parliament. Look for EUR to rally today as it catches up to GBP.

Key Economic Numbers:                    Forecast   Previous

CAD Inflation Rate Yearly (Jan)              +1.8%       +2.0%

US Factory Orders Month (Dec)              +1.1%       -0.6%

US Pending Home Sales Month (Jan)       -2.0%        -2.2%

 

  • Drummond Gill