Last Week’s FX and Economy Summary Dec 23, 2019

US-China trade deal underwhelms 

US-China trade developments remained under scrutiny. There were still significant uncertainties, but sources suggested that the phase-one deal would be signed in January which helped underpin global equity markets amid optimism that the global economy could stabilise in 2020. 


Latest business confidence data was mixed with headline releases generally disappointing, although underlying components suggested that companies were optimistic over the outlook. 

Housing data remained strong with a key confidence indicator strengthening to a 20-year high.

Markets ruled out the potential for any cut in interest rates during the first quarter of 2020. 

The House of Representatives formally voted to impeach President Trump and there will be a trial in the Senate next month. The market impact was very limited with strong expectations that the Upper House would acquit Trump.


The latest business confidence data suggested that conditions had worsened further in the run-up to December’s election with further contraction in manufacturing as exports remained weak. The data was significant in undermining Sterling sentiment.

The labour-market data was mixed with unemployment holding at 3.8% while the headline inflation rate remained at 1.5% and retail sales recorded a net monthly decline.

The Bank of England held interest rates at 0.75% with two committee members again voting for a rate cut. The bank stated that interest rates could be cut if the global economy failed to stabilise and Brexit uncertainty remained entrenched. There would, however, be scope for limited rate increases if these risks did not materialise.

Sterling was subjected to a correction following sharp election-related gains. This selling intensified as the government announced that the Brexit transition period would not be extended beyond the end of 2020. This stance revived fears that there could be a disruptive full exit at the end of next year which triggered fresh selling pressure.


The latest Euro-zone business confidence data was generally disappointing with the key German manufacturing index stuck in recession territory.

The influential IFO business sentiment survey, however, pointed to increased optimism within the economy, especially in the services sector. 

Markets overall wanted more evidence of recovery before boosting confidence in the outlook and buying the Euro.


New Zealand third-quarter GDP beat consensus forecasts with a 0.7% increase and overall confidence in the economy strengthened further as business confidence continued to recover.

The Reserve Bank of Australia reiterated that interest rates could be cut again if the economy failed to improve, but the latest jobs data beat market expectations and markets were less confident that rates would be cut again in February which helped support the currency. 

Canadian CPI inflation increased to 2.2% for November from 1.9% previously while the underlying rate increased slightly. The Canadian dollar was also supported by firm oil prices during the week.

Tim Clayton

Tim Clayton is a market analyst with more than 20 years of experience in the financial markets, with particular focus on currencies. Holds an economics degree from University of New York. Writes for multiple publications including and SeekingAlpha so he is on top of all the happening in the world of currencies and macro-economics.

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