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Daily Market Analysis
Dollar Demand Dying?

Karl Schamotta December 22, 2016

– US Q3 GDP Revised Higher

– CAD Inflation Misses Mark

– GBP Creeps Lower Against USD, EUR


Good morning. Global markets are very, very quiet this morning as investors prepare for the holiday slowdown. Foreign exchange markets are especially silent with no major moves overnight. The dollar took a little dip on Wednesday and continues its slide this morning despite some stronger US GDP figures. The euro is trading steadily, with European bourses mostly flat, even as Italian policymakers prepare to nationalize Monte dei Paschi, the world’s oldest and most troubled bank. Sterling crept lower, hitting a one-month low versus the greenback and a two-week low against the euro as some last minute Brexit fears hang over the market like a thick London fog. It was an especially quiet Asian session with no data to speak of. The Japanese yen strengthened again and is now more than 1 percent higher, off this week’s lows versus the dollar. North American equities are poised to open slightly lower, with all eyes on the Dow Jones and its assault on 20,000.

As earlier reported, the US dollar took a little dip on Wednesday, perhaps a victim of some end of the year profit taking? Yesterday, it was reported that existing home sales rose 0.7 percent in November, to 5.61 million homes, versus expectations of only 5.20 million. This was the highest figure since February 2007 and further underscores the growing momentum in the American economy. The fact the US dollar could not rally further on such a bullish result is quite interesting, especially as equities failed to make new gains as well. This morning, it was reported that 275k Americans filed first-time unemployment claims for the week ending December 16th – another very strong number, despite missing expectations closer to 260k. Finally, we had the final revision to Q3 GDP which showed once and for all the US grew at an annual rate of 3.5 percent. This third and final revision is much stronger than the +2.3 percent increase originally recorded. New home sales and consumer confidence figures finish off the second to last week of 2016 tomorrow morning.

The Canadian dollar’s slide has finally stabilized this week, even as the Loonie took a tumble yesterday along with oil prices. Offsetting last week’s unexpected drop, crude oil stocks increased by 2.256 million in the US as reported by the EIA which knocked crude prices down by 1.80 percent. This morning, it was reported that October retail sales increased in Canada, up 1.1 percent over the previous month, while consumer prices in November unexpectedly dipped 0.4 percent. The USD/CAD remains in a bullish uptrend for the moment, but as we alluded to earlier in the morning’s report, profit taking could provide a boost for other major currencies as we get closer to year-end. The data calendar is very quiet up north next week with more broad market themes likely to guide the Loonie’s price action.

Have a great Thursday.

Stephen Casey

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