CAD
The Canadian dollar has not seen significant movement in response to yesterday’s data or news, with the focus primarily on global developments. As markets remain digesting the latest US economic data, the loonie has traded relatively quietly. The USDCAD pair remains below the 1.44 level, continuing to reflect the cautious optimism surrounding the Canadian economy amid ongoing political uncertainty.
USD
Following a relatively quiet trading session yesterday, the US dollar remained largely stable, although a few data points provided key insights. Headline retail sales for December came in below expectations at +0.4% m/m (forecast: +0.6%), indicating softer consumer spending growth. However, underlying retail sales performed better, suggesting that the US consumer is still resilient. In other data, both the regional Philly Fed index and the homebuilder sentiment index exceeded expectations, signalling strength in key sectors of the economy.
Despite these mixed data points, US bond yields continued to retreat slightly, but not to the same extent as seen earlier in the week. Treasury yields were 1-5bps lower on the day, a move that may reflect market digestion of dovish comments from Federal Reserve officials, although overall sentiment in the market remained relatively stable.
EUR
The euro traded within narrow ranges yesterday, with EUR/USD holding just below the $1.03 level. The currency pair has been stuck in a tight range as investors await more concrete macro data, with little movement in either direction. The European currency continues to struggle against the dollar, reflecting the broader USD strength in recent weeks.
There was little to disrupt the status quo yesterday, as European inflation data and political risks in the EU remain the main focal points for EUR traders. Any substantial surprises in these areas could drive further volatility in the EUR/USD pair, but for now, the euro’s bearish outlook remains intact.
GBP
Sterling’s performance was weaker yesterday following the release of the UK GDP data for November, which showed a very modest growth of +0.1%, below expectations of +0.2%. This underlines the lack of momentum in the UK economy, which has continued to face challenges in the post-Brexit era. The disappointing data weighed on the pound, which started the morning on the defensive.
In addition, UK retail sales for December were released earlier today, showing a sharp decline of -0.3% m/m, well below the consensus forecast of +0.4%. This marks another blow to sterling, as the UK consumer faces challenges ahead. As a result, GBP/USD has remained under pressure, trading near the $1.22 level, while GBP/EUR continues to hold steady within the 1.1800 – 1.1900 range. The UK economic outlook remains subdued, with the pound likely to remain vulnerable to further downside risk in the short term.
This content was originally published by our partners at Monex Canada.