Last week was another very rough week for the Oval Office in the U.S. Even though the announcement from North Korea that it would hold off on its plans to launch missiles toward Guam generated a wave of optimism from investors early in the week, President Donald Trump’s response to the tragic events in Charlottesville was the main focus of attention. His comments generated indignation from many prominent Americans, Democrats and Republicans alike. In reaction, numerous senior U.S. business leaders withdrew from President Trump’s economic advisory panel, forcing him to completely dissolve it. Moreover, Trump ended the week without his chief strategist, as it was announced that Steve Bannon was leaving his role at the White House on Friday afternoon.
The week had started out on a positive note for the U.S. dollar, with U.S. Retail Sales data released Tuesday showing more substantial progress than analysts had expected. However, from Wednesday to Thursday, the U.S. dollar lost close to 150 points against its Canadian peer, mainly due to the feeling of uncertainty on markets after the minutes of the most recent U.S. Federal Reserve (Fed) meeting were released and the political happenings of last week. The minutes of the most recent Fed meeting highlighted a sense of indecision and divergence between committee members with regard to monetary policy, particularly due to the lack of a precise launch date for reducing the Fed’s balance sheet. Canadian inflation data released on Friday morning showed an increase in prices of 1.2% for July, in line with economists’ consensus and an increase over the previous month. The slide in the U.S. dollar continued throughout the day on Friday with a drop of close to 100 points.
The euro also fell prey to strong fluctuations against the U.S. dollar. Indeed, the EUR/USD pair plummeted close to 100 points after the minutes of the most recent European Central Bank (ECB) meeting were released showing concern regarding the strength of the single currency, which could slow the reduction of quantitative easing measures adopted to address crisis situations. By the end of last week, the euro had already retraced a significant portion of this downward move.
Last week also marked the start of NAFTA negotiations between North America’s three trade partners. The U.S. representative made a bold statement right off the bat, demanding major changes to the existing agreement.
This week in Canada, we’ll be keeping an eye on June Retail Sales. South of the border, we’ll get a look at monthly Durable Goods Orders data and New and Existing Home Sales. We will also keep an eye on the annual Jackson Hole conference that will take place from August 24th to August 26th, as the main central bankers will meet to discuss global economy.