Morning Commentary & Currency Insights – July 3, 2018

With the long weekend behind us, focus in Canada now shifts back to the markets as we gear up for dual jobs numbers at the end of a shortened week. A holiday interrupted week has the US quiet on the economic release front until we see the FOMC Minutes on Thursday. The Dollar Index is down 0.28% as investor sentiment remains brittle. The US is slated to impose tariffs on $34B worth of Chinese imports effective July 6^th and China has made it clear that they will retaliate accordingly. The Chinese Central Bank intervened following a slide in Yuan over the course of the last couple weeks surrounding US-China trade concerns. Trump is also trudging along with plans to penalize key trading partners as he looks to push towards his goal of ‘America First’ trade deals across the world. The BoC has their rate decision next week, and after relatively hawkish comments from Poloz last week and positive GDP MoM numbers on Friday, investors are eyeing CAD as there’s currently an 83.4% chance of a hike priced into the markets – up 30% from two weeks ago.

EUR saw gains after Angela Merkel reached a deal on immigration with her coalition partners, resolving the shadow of doubt that had been placed after the coalition threatened to pull support if a deal had not been reached. GBP is soft as news supporting other G10 currencies is applying some pressure to Sterling. The British Parliament is working on it’s Brexit White Paper for later this week which could provide more clarity regarding a Brexit strategy.