Partner Center Find a Broker

The NAFTA replacement deal a.k.a. USMCA continued to enjoy the spotlight throughout the New York session, with the Loonie getting an additional boost from rising crude oil prices.

The British pound also had its share of gains on talks that the U.K. government might be willing to compromise to strike a Brexit deal.

  • Canadian Markit manufacturing PMI down from 56.8 to 54.8
  • U.S. ISM manufacturing PMI dipped from 61.3 to 59.8 vs. 60.1 forecast
  • U.S. construction spending up 0.1% vs. 0.5% forecast, 0.2% previous
  • New Zealand NZIER business confidence index down from -20 to -30
  • U.K. PM May open to compromise on Irish border backstop issue?
  • Chinese banks closed for the holiday
  • RBA monetary policy statement coming up

Major Events/Reports:

Some risk-taking on USMCA

Wall Street kicked off the last quarter of the year on a positive note thanks to the USMCA (United States-Mexico-Canada Agreement) being signed, sealed, and delivered. Now it doesn’t roll off the tongue quite as smoothly as NAFTA does, but investors seem chipper about it!

  • Dow 30 index is up 192.90 points to 26,651.21 (+0.73%)
  • S&P 500 index is up 10.61 points to 2,924.59 (+0.36%)
  • Nasdaq is down 9.05 points to 8,037.30 (-0.11%)

According to the joint statement issued by U.S. Trade Representative Lighthizer and Canadian Foreign Minister Freeland:

USMCA will give our workers, farmers, ranchers, and businesses a high-standard trade agreement that will result in freer markets, fairer trade and robust economic growth in our region.

In a statement at the White House, the POTUS also mentioned that the “measures will support many – hundreds of thousands – American jobs.” Canadian PM Trudeau acknowledged that this removes several uncertainties but admitted that they had to make some difficult compromises.

On China, Trump said that it was still “too soon” to talk about a trade deal since they’re still waiting for the latest set of tariffs to kick in and give the U.S. some leverage in negotiations.

WTI crude oil hits $75 per barrel

Black Crack prices were also on stronger footing, with WTI crude oil climbing back to the $75 per barrel area and Brent crude oil hitting $85 per barrel – its highest level in nearly four years.

Analysts point to anticipation for the next round of U.S. sanctions on Iran, which would target their oil exports, as the likely factor putting downside pressure on supply expectations. According to a survey by Bloomberg, the OPEC pumped 30K more barrels of crude oil in September as higher output from majority of the cartel members outweighed the drop of 140K barrels from Iran.

The USMCA was also seen as positive news for the commodity price, as part of the deal lets Mexico buy more crude oil from Uncle Sam.

U.K. open to Irish border compromise?

Some signs of concession are being seen in Brexit talks as headlines are indicating that No. 10 might have a few more suggestions to work around the Irish border backstop issue.

You see, talks have been at a deadlock as neither the U.K. nor the E.U. seemed willing to budge on this key component of the deal. But according to a senior British official, the U.K. might be willing to give in to keeping the border between the British mainland and Northern Ireland free of trade checks but would need the E.U. to keep the kingdom temporarily part of the customs regime.

Comments from Brexit Secretary Raab on how there might be a deal in sight also brought some volatility to the table. Some think that concessions from the U.K. could pave the way for more discussions, but E.U. officials have previously reiterated that it’s gonna have to be a backstop deal or no deal.

Of course on the U.K. side of things, approval from lawmakers might also be tough to secure, and all eyes and ears will still be on PM May’s speech to close the Tory conference tomorrow.

Major Market Mover(s):

CAD

The Loonie continued to rally across the board, lifted by the USMCA announcement earlier on and getting another boost from rising crude oil.

USD/CAD slumped from 1.2807 to a low of 1.2782; CAD/JPY surged from a session low of 88.82 to a high of 89.14; EUR/CAD is down to a low of 1.4795, and GBP/CAD fell from a high of 1.6805 back to the 1.6670 area.

GBP

Sterling was also in good spirits thanks to speculations that the U.K. might compromise on the Irish border issue. However, the gains were short-lived as traders realized that an actual deal hasn’t been struck yet.

GBP/USD popped up from 1.3038 to a high of 1.3116; GBP/JPY jumped from 148.38 to a high of 148.87; EUR/GBP spiked down to a low of .8864, and GBP/NZD is up to 1.9751.

Watch Out For:

  • Chinese banks closed in observance of National Day
  • 4:30 am GMT: RBA monetary policy statement (Here’s what to expect.)
  • 5:00 am GMT: Japanese consumer confidence index (dip from 43.3 to 43.0 eyed)