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The U.S. dollar reasserted its dominance against most of its major counterparts as tax reform came back in the spotlight and data came in stronger than expected. However, the currency stalled from its climb when North Korea conducted another missile test.

Meanwhile, the pound gained further traction on its rise when it was reported that the U.K. and E.U. have agreed on a Brexit bill. The Loonie, on the other hand, was dragged down by a more cautious BOC tone.

  • Richmond manufacturing index up from 12 to 30 vs. consensus at 14
  • U.S. CB consumer confidence index rose from 126.2 to 129.5 vs. 123.9 forecast
  • Canadian raw materials price index up 3.8% vs. previous 0.2% dip
  • Canadian industrial product price index recovered by 1.0% from previous 0.3% fall
  • North Korea launched another ICBM test near Japan
  • The Telegraph: Britain and EU reach an agreement on Brexit bill
  • BOC Financial System Review: Canadian financial sector is resilient
  • BOC head Poloz: A little too soon to gauge how hikes affected economy

Major Events/Reports

Brexit bill within reach?

Just when it seemed that Brexit issues would continue to keep a lid on sterling’s gains, The Telegraph reported that the U.K. and E.U. are coming to terms in drafting a Brexit bill.

Word through the grapevine is that an agreement-in-principle has been reached on the 60 billion EUR fee that the E.U. is charging to move things along. However, the final figure is still subject to change.

As of this writing, the latest issue on the table is that of Ireland’s border, but the hope of having the negotiating parties see eye to eye has been reassuring for pound bulls.

Senate Republicans to push for tax vote

By the looks of it, Senate Republicans are keen on voting on the tax reform bill by Thursday even as some details still need to be ironed out.

Without even having any discussions, the Senate Budget Committee rushed to approve legislation for a 12-11 party-line vote that left Democrats disgruntled.

Recall that the House previously approved a measure eliminating the need to secure a super majority to get the bill through in Congress. This means that, should the Senate version pass, the next step would be to reconcile it with the House version then sent to Trump for his signature.

This might be easier said than done, though, as a couple of Republicans (Johnson and Corker) have threatened to vote against the Senate tax bill unless their individual concerns are addressed.

For now, U.S. markets seem pleased with the latest developments as equity indices closed in the green:

  • Dow 30 index is up 255.93 points to 23,836.71 (+1.09%)
  • S&P 500 index is up 25.62 points to 2,627.04 (+0.98%)
  • Nasdaq is up 33.84 points to 6,912.36 (+0.49%)

U.S. bonds, however, are slightly in the red:

  • U.S. 10-year yield is down to 2.331% (-0.25%)
  • U.S. 5-year yield is down to 2.064% (-0.08%)
  • U.S. 30-year yield is down to 2.761% (-0.16%)

BOC Financial System Review

In the Bank of Canada’s Financial System Review, the central bank noted that the sector remains resilient and that stabilization in Toronto’s housing market is underway.

This marked a more upbeat tone than their review six months ago as they mentioned that sustained supply and demand could prop prices up while higher interest rates could keep investment activity in check.

However, in a press conference that followed the release of the report, head honcho Poloz sounded a bit more cautious than usual.

“The risks are essentially unchanged. However, the policy changes affecting housing finance are clearly a step in the right direction.”

When asked about how the lower risks in the housing market could impact monetary policy, Poloz said that the factors are coming together and that there is no fundamental inconsistency.

For now, Poloz refrained from giving more hints on future hikes as he admitted that it’s still too soon to gauge how the recent tightening moves have impacted the housing market and overall economic performance.

Return of North Korean jitters

Toward the end of the U.S. session, news broke out that North Korea has once again launched an intercontinental ballistic missile that landed off the coast of Japan.

According to U.S. Secretary of Defense James Mattis, this particular missile flew higher than any previous test. Japanese Defense Minister Itsunori Onodera said that the ICBM may have reached an altitude of around 2,500 miles while the Pentagon noted that it traveled about 1,000 kilometers before landing in Japan’s exclusive economic zone.

Furthermore, the Pentagon said:

“Our commitment to the defense of our allies, including the Republic of Korea and Japan, in the face of these threats, remains ironclad. We remain prepared to defend ourselves and our allies from any attack or provocation.”

This test capped off a two-month pause in Pyongyang’s missile launch activity and comes just after Trump’s visit to the Asian region and decision to put North Korea in the list of countries with state-sponsored terrorism.

Major Market Mover(s):


Volatility for pound pairs jumped when news of a Brexit bill broke out, followed by a bit of denial from the U.K. government.

GBP/USD shot up to a high of 1.3388 then dipped back to 1.3336, GBP/JPY rallied from a low of 146.98 to a high of 149.28 then retreated to 148.64, EUR/GBP is down to .8886, and GBP/AUD eventually landed back at 1.7600.


The Greenback rallied on the heels of upbeat data, Powell’s confirmation speech, and the Senate Republicans’ push for tax reform progress but took a quick pause on reports of North Korea’s ICBM launch.

USD/JPY climbed to a high of 111.64 then retreated to 111.34, EUR/USD hit a low of 1.1826 then pulled up to 1.1850, USD/CHF retraced to a high of .9847, and AUD/USD is down to the .7600 handle.


The Loonie was once again behind the pack as crude oil continued to pull back from its previous rally while the BOC’s more cautious tone overshadowed upbeat data.

USD/CAD busted through the 1.2800 barrier to a high of 1.2825, CAD/JPY is down to 87.00, and GBP/CAD popped up to a high of 1.7154.

Watch Out For:

  • 11:50 pm GMT: Japanese retail sales y/y (0.2% expected, 2.3% previous)
  • 12:00 am GMT: RBNZ Governor Grant Spencer’s testimony