– Powell claims to be in no hurry to reduce rates.
– EURUSD ignores PMI data.
– US dollar adding to post NFP gains.
USDCAD: open 1.3487-91, overnight range 1.3460-1.3493, close 1.3461, WTI $71.83, Gold, $2024.62.
The Canadian dollar switched gears in the aftermath of Friday’s blow-out US nonfarm payrolls report and has yet to recover.
USDCAD was drifting towards 1.3365 when the US Bureau of Labor Statistics announced that nonfarm payrolls rose 353,000 in January which was nearly double the forecast. In addition, the December numbers were revised 113,000 higher to 333,000. So much for a cooling economy.
The reaction was swift and brutal. The US dollar soared as bearish short term positions were stopped out. Bonds tanked and the US 10-year Treasury yield jumped from Friday’s low of 3.88% to 4.114% in NY today.
Fed Chair Powell’s interview on that air on 60 minutes Sunday night didn’t help. He advocated prudence saying, “The prudent thing to do is to just give it some time and see that the data confirm that inflation is moving down to 2% in a sustainable way.” And that interview was taped on Thursday, prior to the employment report. Essentially the data dependent Fed is suggesting that they aren’t sure of the data that they are depending on.
EURUSD got hammered post-NFP and continued to slide overnight, falling from its NY close of 1.0788 to 1.0746 just before NY opened. German and Eurozone PMI data didn’t have much impact as the data continued to show that the economies were still in contraction territory. The short-term technicals are bullish above 1.0740, which if broken will extend losses to the 1.0690-1.0700 area.
GBPUSD is trading defensively in a 1.2582-1.2644 range due to the belief of steady US rates for longer, thanks to Powell’s comments on Sunday and the robust nonfarm payrolls report on Friday. GBPUSD saw a modicum of support when the January S&P Global Services PMI rose to 54.3 from 53.8 previously and Composite PMI at 52.9 (previous 52.5).
USDJPY drifted in a 148.27-148.82 range after rallying hard in the wake of Friday’s NFP report. Traders have apparently forgotten the euphoria following the BoJ summary on January 31 when officials hinted that they were moving closer to raising rates.
AUDUSD consolidated its Friday losses in a 0.6486-0.6521 range, after the blow-out US NFP data knocked prices from 0.6611. The move flipped the short-term technical picture to bearish while prices are below 0.6550. The RBA is nearly universally expected to leave rates unchanged at 4.35% at tomorrow’s meeting.