– Canada’s unemployment rate expected to rise to 6.5% from 6.4%.
– Global equity rally improves risk sentiment.
– US dollar slides with stock market gains.
USDCAD: open 1.3733, overnight range 1.3718-1.3744, close 1.3735, WTI $76.35, Gold, $2432.72.
The Canadian dollar had a wild week and despite teetering on the edge of the abyss on holiday Monday in Canada, prices returned to last Friday’s range. The Canadian dollar wasn’t the only G-10 currency to endure large price swings-they all did. The catalyst was the fall-out from the August 2 US nonfarm payrolls report. The weaker than expected data raised the spectre of a recession which prompted traders to price in a 50 bp rate cut on the September 18, FOMC meeting.
Yesterday’s higher than expected weekly jobless claims numbers helped alleviate the fears and it drove the S&P 500 index to its best single day gains since November 2022. Even so, it wasn’t enough to recoup all its losses from the August 2 close.
For a short time this morning, equity price action will take a back seat as the July Labour Force Survey data is released. Canada is expected to have added 22,500 jobs in July, a sharp improvement from June’s loss of 1,400. The unemployment rate is forecasted to rise slightly to 6.5% from 6.4%. A weak report could support another 25 bps rate cut by the Bank of Canada on September 4.
Oil prices are steady, with WTI trading between $75.89 and $76.42. Prices are supported by Wednesday’s EIA report showing U.S. crude stocks fell by 3.7 million barrels in the week ending August 2, alongside caution due to Middle East tensions. Iran and Hezbollah are reportedly planning a measured retaliation against Israel, designed to avoid provoking a severe response from the IDF and the U.S.S. Abraham Lincoln.
EURUSD traded quietly in a 1.0911-1.0929 range, with a dearth of data and holiday markets combining to keep price action contained. Traders are content to wait for next week’s US inflation data.
GBPUSD is mildly offered, falling steadily from 1.2773 to 1.2737. The downside is seeing some support from divergent interest rate outlooks. The Bank of England is expected to keep UK rates higher in the short term, while the Fed is expected to cut rates by up to 50 bps next month.
USDJPY consolidated yesterday’s gains in a 146.72-147.82 range after soaring from 145.43 to 147.55 following Thursday’s US jobless claims numbers. The prospect of sharply lower rates and dovish comments from BoJ Deputy Governor Shinichi Uchida fueled the moves.
AUDUSD drifted in a 0.6575-0.6605 band, with price action mirroring the cautious risk sentiment environment. Prices found some support from higher-than-expected Chinese inflation data.
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