As you all can probably tell, I did not win the Powerball jackpot. Onward and upward I suppose. It’s another beautiful day in the world, as world stocks are plunging along with oil prices and fresh terrorist attacks rock the city of Jakarta. The US dollar continues to outperform against the commodity currency bloc while the euro is rising a bit this morning on some German growth optimism. Meanwhile Sterling continues to grind at twenty year lows versus the greenback as the Bank of England concludes its latest policy meeting.
Overnight, it was a rather orderly sell-off. With little data to cling to during the Asian session, investors embraced the risk-off move, buying the dollar and yen and shedding commodity and emerging markets currencies. The Chinese Yuan slipped lower again despite a late rally by the Shanghai index, which closed up 2%. Still down for the year, it was the sole index to post any gains today as investors across Asia begin to really worry that policymakers are losing their grip on things – it is expected that China could post its slowest growth in 25 years in 2016. Meanwhile in Europe, it was reported that the German economy expanded in 2015 at its fastest rate in four years. The euro has surged about 100 points this morning, gaining ground against the dollar and the beleaguered pound. In a vote of 8-1, the Bank of England kept rates and QE unchanged at its latest policy meeting. Sterling finally found a little boost but remains entrenched in a volatile sell-off. The bank noted inflation would take longer to rise to target levels and noted wage growth could be especially slow in the coming year. If you haven’t taken advantage of today’s dead cat bounce to sell pounds, please do so.
Turning toward the US, we get another peak at US employment data with weekly jobless claims. The US dollar, which has had an excellent week, looks to continue its ascent on the back of more solid US economic data. The market is expecting that only 278k American filed first time unemployment claims. As earlier reported, the US economy is currently sliding below the radar with all eyes on China and its residual effects on the commodities space. Oil pushing below $30 per barrel is huge news and we should all expect more pressure on Chinese policymakers to put forth any ideas to generate some momentum in what has become a very influential economic power. Tomorrow, December retail sales closes out the week – it is expected that consumer demand rose 1.65% over the same period in 2014.
The Canadian dollar remains weak as we go to print this morning. Not to beat a dead horse, but as oil continues to slide, so does the Loonie. The CAD$ is now trading at nearly twelve-year lows against its American cousin and there does not seem to be much light at the end of the tunnel. The Bank of Canada’s next policy meeting will be held next Wednesday and as we approach that meeting, there should be a lot of market speculation as to what Mr. Poloz and company will decide to do. This of course being the first meeting under PM Trudeau’s administration, there has to be a point where action must usurp words. December inflation precedes next Wednesday’s announcement so we should look there for any hint on decisive action.
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