News & analysis


The loonie remained relatively flat this morning, floating in the middle of its recent range and ignoring yesterday’s rise in oil prices. Both WTI and Brent hit a 5-month high as Hurricane Laura bore down on key refining facilities on the US Gulf Coast. The hurricane has so far shuttered more than 85% of oil output according to the BSEE, closing almost 3 million b/d of refining capacity. An industry report which stated that American energy demand is recovering added to optimism and likely also supported the rise in crude oil. Today’s calendar is empty for the Canadian data front, but Senior Deputy Governor Carolyn Wilkins will speak at a Bank of Canada Mandate Workshop at 15:00 BST, though the speech is unlikely to yield big moves in the Canadian dollar.


The US dollar has remained on the defensive on the whole this week, and most major currencies continued to strengthen against the greenback overnight. The virtual Republican Party convention and housing market data were among the main headlines of the day. Donald Trump broadcasted the second night of the Convention from the White House, with Mike Pompeo giving a speech from Jerusalem. New home sales rose to 901,000 in July, the highest in 14 years, as low mortgage rates have spurred activity in the sector. The data paints a picture of fervent activity in the housing market, likely driven by a subset of households who remain confident about their income prospects and encouraged by low mortgage rates.  The wider consumer sentiment picture remains murky: consumer confidence figures reported by the Conference Board fell to a six-year low, according to data also released yesterday. Durable goods orders will be released today at 13:30 BST.


The euro pulled back from the week’s highs against the dollar this morning while remaining in a familiar trading range on the whole. Germany announced the extension of its Kurzarbeit programme, which has kept millions of people from losing their jobs during the pandemic. The subsidies that were originally intended for 12 months, will now be extended until the end of 2021. Finance Minister Olaf Scholz said that the money will be pulled out of next year’s federal budget, adding to the €1.2trn Germany has made available this year. Job scheme support programmes in other eurozone countries will be under review in the coming weeks as well, with the Netherlands planning on deciding on the extension and conditions of its programme this week. The eurozone economic calendar is virtually blank today, leaving EURUSD at the mercy of US Durable Goods Orders at 13:30BST and further developments in risk sentiment.


Sterling gained some momentum yesterday, appreciating against both the euro and US dollar. The Confederation of British Industry released its latest distributive trades survey, shedding further light on the state of employment in the sector. Two of three retailers reported falling employment in August, the highest proportion since the survey began in 1983, and a threefold increase year-on-year. The index tracking employment fell to its lowest level since 2009. Official retail sales data from the UK is painting a significantly more optimistic picture, however. Retail sales volumes rose to pre-crisis levels in July, although these data do not account for all of consumer spending in the UK. On the whole, the surge in retail sales and the housing market in recent months suggest the UK remains on track for a record-breaking recovery in the third quarter. The main uncertainty is over what pace the recovery will take after that. With some 8 million jobs still on furlough and the scheme due to be wound down, higher unemployment may put a dampener on the nascent but powerful recovery in the housing market and consumer spending. Bank of England Chief Economist Andy Haldane will speak today at 17:00 BST.



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