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Loonie Crowned 2019 G10 King | Year Begins with Global Manufacturing in Focus

Published January 2, 2020
  • The Canadian dollar finished 2019 at a 14-month high, and its annual gain of 5% against the US dollar was the highest among its G10 counterparts.  As we flip the calendar over to 2020, the loonie is benefiting from the improved global sentiment and easing trade tensions, which have helped propel commodity prices higher and weaken the demand for US dollars.  Looking ahead, the fate of the Canadian dollar is going to strongly depend on whether trade tensions flare up again in 2020 after the initial boost of the US-China Phase One deal wears off.  If the trade war with China reignites, or the US takes the trade battle to Europe, the global economy and risk sentiment will be no doubt feel the pressure again.  The same factors that helped crown the loonie G10 King in 2019 could help it repeat the feat again in 2020, or just as quickly dethrone it if things go south.
  • Manufacturing PMIs are the first key data releases of the decade, with yesterday’s Australian and Chinese numbers both missing expectations on the December readings.  Despite these misses there were a few bright spots in Asian PMIs, as data from South Korea, Taiwan, and Thailand all moved back into expansionary territory.  Europe, on the other hand, showed another decline in manufacturing and remained in contraction territory for the 11th consecutive month.  The euro, which had a strong finish to 2019, has pulled back slightly on the news and is hovering just below the 1.12 level against the dollar.  Canadian and US Manufacturing data are on deck later this morning, with consensus expectations showing a flat US PMI and a slight increase in Canadian PMI.

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