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Economic Data Puts the Loonie and Greenback in Focus. Geopolitics Remains in the Spotlight, However…

Economic data from the U.S and Canada will influence, though there will be continued caution as Iran holds back from any immediate retaliation.
Bob Mason
Businessman touching stock market graph on a virtual screen display.

Earlier in the Day:

It was a relatively quiet day on the Asian economic calendar in the earlier hours of this morning.

Key stats included finalized December service sector PMI numbers out of Japan.

Outside of the numbers, it was risk-on through the early part of the day as the markets took its cues from the U.S.

For Japanese Yen

In December, the Services PMI fell from 50.3 to 49.4, which was worse than a prelim 50.6.

According to the finalized survey,

  • The return to contraction rounded off the worse 4th quarter since 2016.
  • Demand conditions reportedly slowed, weighing on business activity at the end of the year.
  • While there was a modest improvement in sales, the rate of increase was weaker than seen through the 1st half of 2019.
  • New business from overseas contracted for the first time since June, while there were reports of rising domestic demand.
  • Backlogs fell at the quickest pace in over one-and-a-half years, as firms continued to hire.
  • The pace of hiring was the fastest in 6-months.
  • While falling from November’s 5-month high, optimism remained solid at the end of the year.
  • On the price front, input prices were on the rise, driven by higher fuel and labor expenses.
  • By contrast, however, firms lowered output prices for the first time since Jul-17.
  • At the composite level, private sector output fell at the strongest rate since Apr-14…

The Japanese Yen moved from ¥108.401 to ¥108.438 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.06% to ¥108.44 against the greenback

Elsewhere

At the time of writing, the Aussie Dollar was down by 0.10% to $0.6933, with the Kiwi Dollar was down by 0.18% to $0.6663.

The Day Ahead:

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Key stats include prelim inflation figures for the Eurozone.

Barring an acceleration in the core annual rate of inflation, the stats are unlikely to have a material impact on the EUR.

Following the PMI numbers on Monday and improving risk sentiment, however, the EUR could find further support ahead of key stats form the U.S.

At the time of writing, the EUR was down by 0.05% to $1.1191.

For the Pound

It’s a quiet day ahead on the economic calendar, with no material stats due out of the UK to provide the Pound with direction.

Following a bullish Monday, supported by better than expected stats and improved risk sentiment, further gains may well be on the cards.

Following the UK General Election result, the UK Services PMI report delivered some optimism on Monday. Avoiding further contraction, business optimism hit the highest level since Sep-18, with new orders rising at the fastest pace since Jul-19.

The figures suggest that the UK economy could be on the brink of a rebound, which would ease the chances of a BoE rate cut this year.

On the Brexit front, there was also some positive news, with the Government standing down from emergency prep work for a no-deal Brexit.

At the time of writing, the Pound was up by 0.03% to $1.3175.

Across the Pond

It’s also a relatively busy day on the data front. Key stats include December’s ISM Non-Manufacturing PMI and November factory order figures.

While factory orders will influence, we can expect the ISM numbers to have the greatest impact on the day.

November trade figures that are also due out will likely have a muted impact on the Greenback.

Outside of the numbers, any chatter from Washington and the Middle East will need monitoring over the course of the day.

At the time of writing, the Dollar Spot Index was down by 0.01% to 96.661.

For the Loonie

It’s a relatively busy on the economic calendar, with November trade data and December’s Ivey PMI due out later today.

After a quiet start to the year on the data front, we can expect plenty of influence from the numbers.

Expectations are for the BoC to stand pat on policy near-term. Members will likely want to see how the USMCA and phase 1 U.S – China trade agreement impact trade terms.

The Loonie was up by 0.03% to C$1.2961 against the U.S Dollar, at the time of writing.

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