Loonie Gains as Greenback Slides

The U.S. dollar is trading on cautious market sentiment this morning and is down against all its G10 trading peers. The only fundamental due today is the Federal Open Market Committee minutes. The minutes will give the market and investors critical insight on Fed's confidence for U.S. growth to factor three more rate hikes for 2017 after raising at last month's meeting. Tomorrow, investors have the ADP employment change followed by Trade Balance and Non-Farm Payrolls on Friday, critical data for future consideration on rate hikes vis-a-vis the Fed. The Canadian dollar is ignoring the recent slide in the price of oil and is up against is G10 trading peer barring the Australian dollar. The strength seems to be coming from investors’ bets on China being able to implement protectionism policies on the yuan successfully by managing the currencies outflows with the new rules and regulations.

The euro is recovering from its low on improved domestic fundamentals. Italian Purchasing Managers' Index for December was slightly lower than expected but the final composite PMI for the euro-zone rose to 54.4 from the preliminary 53.9. Euro-zone inflation also increased to 1.1% y/y, up from the previous 0.6% in November. Higher inflation and stronger growth are positive but this will not likely alter the European Central Bank’s monetary policies and the continues to be vulnerable to the downside.

The Great British Pound remains soft even as economic data released in the U.K. such as Consumer Confidence, Mortgage Approvals, and Construction Spending were all better than expected. Uncertainty lies ahead as a chief British envoy to the European Union resigned only three months ahead of the Brexit approval process renewing concerns of a hard Brexit.

The Aussie is outperforming today on news from China. The People's Bank of China fixed the yuan higher against the U.S. overnight. The markets also noted reports that Chinese authorities continue to explore ways to flight capital outflow and support the yuan. The commodity currency is trading higher in this environment as participants consider the implication of China’s moves.

Oil (WTI): $52.47

Gold: $1,163.87

Silver: $16.39

Dollar Index: 102.9

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