October 29 2018

Oct. 29, 2018 (Western Union Business Solutions)  – The U.S. dollar was camped near multi-month highs after U.S. data printed close to forecast. Consumer income and spending both rose in September while underlying inflation held at the Fed’s 2% sweet spot. Key for the buck this week will be Friday’s October employment report. America’s economy likely added 190,000 jobs in October after it netted 134,000 in September, the fewest in a year. Unemployment is expected to remain at 3.7%, the lowest in nearly 50 years. Wages are forecast to rise at an annual rate of 3.1% from 2.8%. Wage growth above 3% could provide a recipe for dollar strength as it would hint at rising inflation and keep the bar low for the Fed to deliver a fourth interest rate hike of the year in December.




Canada’s dollar steadied above six-week lows, but sentiment remained fragile with oil struggling to sustain gains. Oil around $67.50 swung between modest gains and losses. The loonie will look to Canadian growth for August, due Wednesday with forecasts pointing to a 0.0% reading after a 0.2% increase in July. An underwhelming outcome would raise the bar for the Bank of Canada to raise rates after its increase last week to 1.75%.




The euro stuck near two-month lows as uncertainty over the head of Germany’s conservative party increased political uncertainty across the continent. Reports today indicated that Angela Merkel may not seek re-election as chair of the Christian Democratic Union. Uncertainty over the outlook for German leadership added to persistent concerns about Brexit and Italy’s budget battle with the EU. European fundamentals, whose tepid shape has pressured the euro, will be in focus this week with midweek data on euro zone inflation and unemployment.




Sterling was camped near two-month lows against the strong U.S. dollar. The pound has been in a downtrend since mid-October as a lack of progress with respect to Brexit negotiations has kept uncertainty at an elevated level. The longer it takes for London and Brussels to clinch a Brexit treaty, the greater the risk of no deal, a scenario that could hasten a disorderly exit from the bloc come March. The Brexit fog over Britain points to the Bank of England leaving its main interest rate unchanged at 0.75% on Thursday.