The US dollar continued its weekly decline against the Canadian dollar on expectations that President Trump will formally sign an interim trade deal with China as soon as today.
The phase-one trade deal will help avoid further tariff escalation after almost two years of a trade war between the world’s two largest economies.
President Trump also promised that this interim trade deal, that sees China ramp up its agricultural purchases from the United States up to $50 billion per year and enforce intellectual property laws, will be followed by others.
Risk sentiment improved significantly on trade deal optimism and the Conservative victory at the UK elections. Johnson’s overwhelming majority in the House of Commons took away a key risk in the markets and supported risk-flows with the Canadian dollar receiving a bid as well.
Nevertheless, markets can still be vulnerable until we get a formal presentation of the trade deal by the US government, as shown by recent reports that Beijing still has concerns over the value of US agricultural imports.
Although neither the US or the Chinese government commented on the reports, the US dollar gained with the New York open, picking up support at an intraday low of 1.3150 against the loonie. As of 2:45 p.m. London time, the USD/CAD pair traded at 1.3176.
Other economic reports from today include the US retail sales data for November which rose less than expected, although data for October was revised up to 0.4% from 0.3% as previously reported.
November retail sales came in at 0.2% vs forecasts of a 0.5% raise. The change in retail sales excluding automobiles came in at 0.1% in November, while forecasts were set at a 0.4% change. This could see analysts cut back their US economic growth forecasts for the fourth quarter.
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