Dollar Bounces As Market Waits For Stimulus Deal

The pullback in sterling on Friday was more significant as Brexit headlines grow more negative. Talks continue but with less than two weeks before Britain is scheduled to leave the European Union, they are no closer to a deal. This morning the European Commission admitted that it is unknown if or when there will be a deal and that seems to be the view shared by UK officials. Fishing rights is still the main obstacle. It is a fraction of UK GDP (0.15%) but a highly emotional issue because Britons believe that British fishing grounds are “first and foremost” for British ships but the EU also wants access for its boats. Quotas are set on the volume of fish that can be caught each year and the UK wants to control who can fish in its waters. The EU on the other hand is under significant pressure to maintain current quotas because of the plentifulness of UK seas. Its such a big point of contention that the Brexit deal could live or die on fish. Stronger UK retail sales may be the only reason why sterling did not see a bigger decline on Friday.

All three commodity currencies saw end of week losses with the Canadian dollar leading the slide. Retail sales in Canada was mixed with spending rising 0.4% in the month of October. The headline number was better than expected but excluding auto purchases, spending growth stagnated. USD/CAD started to trend higher on Thursday evening but it catapulted upwards after retail sales. Canada’s October GDP report is the only piece of noteworthy data scheduled from the commodity-producing countries next week.

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