Daily Afternoon Report 12.01.2016

The U.S. dollar slipped lower against its Canadian counterpart on Tuesday, pulling away from fresh 12-1/2 year highs as concerns over declining oil prices and volatility in China persisted.

The commodity-related Canadian dollar remained under broad selling pressure as crude oil prices fell to fresh 12-year lows on Tuesday amid concerns that slowing global demand is fueling a massive supply glut.

Separately, investors remained concerned over the extent of the economic slowdown in China, following a steep selloff in Chinese stocks and a renewed devaluation in the yuan since the start of the year.

Shares in China closed higher on Tuesday after Beijing stepped up measures to support the yuan. China’s central bank guided the yuan higher for the third day, but uncertainty over Beijing’s currency policy persisted.

Sterling weakened after the U.K. Office for National Statistics said industrial production fell 0.7% in November from the previous month, compared with forecasts for a flat reading. It was the biggest drop since January 2013.

Manufacturing production fell 0.4% compared with October, well below forecasts for a 0.1% increase.

On a year-over-year basis, manufacturing production contracted by 1.2%, its fourth consecutive month of contraction. Economists had forecast a more modest decline of 0.8%.

Sterling also remained under heavy selling pressure amid concerns that the Bank of England will signal that rates are likely to remain on hold for long after its policy meeting on Thursday.