News & Analysis


The loonie flew to a 5-week high against the US dollar last week. The rally was fuelled by a neutral Bank of Canada statement, a broadly soggy US dollar, and strong labor market data to wrap up the week. Today, oil markets are seeing green following the news that Saudi Arabia appointed Prince Abdulaziz bin Salman as energy minister, the first time a member of the royal family has held the position. Oil bulls will also look towards Iraq’s supply-side comments and looser financial conditions in China to justify the rally. Iraq has promised to reduce oil production in October. All in all, the rally in crude and positive sentiment from last week has allowed the loonie to maintain last week’s gains as the US dollar starts the week on the front foot.


The US dollar took on a pale of water last week as trade talks between the US and China were put back on track for October while US fundamental data was seen as slowing after a dismal print for the ISM Manufacturing PMI. Friday’s data included non-farm payrolls for August, which rose by 130,000, significantly less than most forecasts. Wage growth remained robust, however, with Average Hourly Earnings rising by 0.4% month on month. The headline figure, which was already below expectations, had been boosted by hiring related to the US Census, to the tune of 28,000 jobs. This week will see a moderate flow of US data, beginning with Consumer Credit figures today at 20:00 BST. Consumer Price Index data will be released on Thursday, followed by Retail Sales on Friday. US-China trade remains the key issue for global markets, and with talks reportedly due to begin again in October further tweets from the President may retain the potential to influence risk appetite.


The euro did rally against the US dollar over the course of last week, but it was more a case of dollar weakness than an improvement in the single currency. The euro’s fortune this week and beyond will, in large part, come down to the events of this Thursday’s European Central Bank meeting. Given the severe deterioration in Eurozone data, particularly in Germany, the consensus expectation is for the ECB to cut rates and restart its quantitative easing programme. Fixed income markets are certainly expecting as much, with euro OIS reflecting expectations of 20 basis points of rate cuts by January, and Eurozone sovereign bond yields approaching fresh all-time lows, even in Italy. The bar for a hawkish surprise, therefore, seems set rather low but is unlikely to be met. This morning’s data includes Sentix Investor Confidence at 09:30 BST.


Sterling rallied 1.08% over the course of the last trading week as Boris Johnson’s Brexit plan was thwarted by MPs and defections within the leading party eroded his majority. Over the weekend, Foreign Secretary Dominic Raab said the PM remains committed to the UK exiting the European Union by the end of October and may challenge the latest Benn legislation requiring him to ask for a delay if there is no deal in place by October 19th – a move that could risk a showdown in the Supreme Court. Raab stated yesterday that the government would adhere to the law but test it to its limit, a theme echoed by ministers such as Sajid Javid too. However, the Secretary of State for Work and Pensions wasn’t on board. Amber Rudd, in fact, left both the cabinet and the Conservative party over the weekend due to the lack of Brexit progress. Today, sterling faces a bombardment of events stemming from Westminster. MPs will run through the formalities of making the Benn bill legislation, which requires the PM to seek an extension come October 19th if no deal is in place, prior to it obtaining royal assent. This is unlikely to be mimicked by Johnson’s plan to force a snap election today. The move by the PM, who will be in talks with Irish PM Varadker in Dublin today, will unlikely find the ⅔ majority it needs without the vocal support of the opposition today. Further, a declaration to prorogue parliament for the next five weeks could be announced late tonight. Outside of British politics, but somewhat tainted by it, this morning will see the release of July’s GDP data where 0.1% MoM growth is expected. This would represent a slight uptick in the UK economy following the 0.2% contraction in Q2 but would prove ineffective in lifting the rolling quarterly average into neutral territory.