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Dollar Ends November Strong, Busy Week Ahead

November was a great month for the US dollar. The greenback traded higher against all of the major currencies with USD/JPY and USD/CHF rising to their strongest levels since June. After lowering interest rates at the end of October, US policymakers made it clear that despite ongoing trade uncertainty and weaker global growth, further easing was not necessary. Much of this has to do with the persistent rise in US stocks, which hit fresh record highs in November. Looking ahead to the last month of the year, we don't expect many surprises but President Trump has a very big decision to make about the December 15th tariffs. His options are to impose, delay or suspend the next tranche and while Trump signed the HK bill in support of protestors, we believe that the next round of tariffs won't happen in December. His history of take and give along with his recent comments that a trade deal is close suggests that the tariffs will be delayed next month. The latest gains in USD/JPY is a sign that many investors share our view.

This past week has been a relatively quiet one marked by the Thanksgiving holiday in the US. Data was mixed with Q3 GDP revised higher, confidence up in one measure, down in another and personal incomes stagnating in October. Yet with stocks at record levels and the labor market healthy, investors are hoping that this holiday shopping season which kicks off on Black Friday will be strong. By Monday we'll have a good sense of consumer appetite into year end.

Looking ahead, the first week of December will be a very busy one. There are two monetary policy announcements, GDP from Australia, trade data from a number of countries along with US and Canadian employment reports. ECB President Lagarde will also be testifying to the European Parliament on Monday and most importantly, the clock is ticking on the December 15th tariffs so the market will be particularly sensitive to trade headlines. The last we've heard from the Reserve of Bank of Australia, interest rates could still come down. No changes are expected at this week's meeting, but investors will be eager to see if their views remain the same and whether its is validated by data because aside from the rate decision, Q3 GDP, PMIs, retail sales and trade numbers are also scheduled for release.

The Bank of Canada will also leave rates unchanged but unlike the RBA, they don't feel that rate cuts are necessary which is important because they have been reluctant to lower rates throughout 2019. Interestingly enough, this view along with better than expected Canadian data has not helped the loonie. USD/CAD remains strong despite slightly better GDP numbers on Friday. Next week will be important one because investors will be looking to the IVEY PMI and labor markets reports to validate the central bank's views.

US non-farm payrolls will also be a big focus but with the Federal Reserve firmly on hold for the rest of the year, the data could have a smaller than usual impact on the dollar. Instead the greenback will be more sensitive to US-China trade headlines. Last but certainly not least, ECB President Lagarde testifies to the European Parliament on Monday. So far, she hasn't shared much of her monetary policy views so investors will be watching the testimony closely. EUR/USD ended the month at 7 week lows and could slip further if Lagarde is open to additional easing.

Author

Kathy Lien

Kathy Lien

BKTraders and Prop Traders Edge

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