Fed Chairman Jerome Powell gave a speech yesterday and said that “monetary policy is now well positioned to support a strong labor market.” He also stated that if the US economic outlook changed, then Fed policy would change as well. These comments show that the Fed has concluded any interest rate moves and that the mid-cycle adjustment is now complete. He mentioned that the economy has continued to improve in a record 11th year of expansion. Traders reacted positively to these remarks and the USD has stayed bid through trading overnight.
EUR/USD trading quietly overnight as traders voice concern over ECB policy. One of the members of the European Central Bank, Francois Villeroy de Galhau, who is the Governor of the Bank of France, said “low-interest rate will continue”. The ECB’s loose monetary policy is weighing on the EUR and to add to the pressure, Germany’s IFO think-tank stated that the German manufacturing sector is in recession.
The GBP/USD remains well bid this morning as new opinion polls show the Conservatives holding their 10 point lead as Election Day on December 12th gets closer. Market PMI release this morning actually came in better than expected at 49.3. Observers had been expecting no change from last month’s 48.6 number, but this release, while still in contraction territory below 50, is a marked improvement. The British Pound may remain “better bid” ahead of the election.
USD/JPY is lower this morning as traders move once again towards safe haven trades in light of the latest developments in US-China trade talks. It took a while for traders to move back to safe haven trading, however this may be the way to go as there is no concrete answer on the deal between the US and China in the near future.
The Bank of Canada will announce their rate decision later this morning and the consensus is that they will keep rates unchanged at 1.75%. BOC Governor Poloz said on November 21st that monetary policy will remain unchanged in December, noting that the current monetary condition is “about right” and while there is concern over trade, the economy remains in good shape. It would not be surprising if the BOC statement mentioned an “insurance cut” moving forward if the trade war continues.
China’s Caixin PMI Services rose to 53.5 in November, beating expectations of 51.2, after last month’s release of 51.1. This was the highest release in 21 months. Both manufacturers and services showed solid increases. Business confidence however remains subdued, reflecting the impact of the US-China trade conflct.