(MENAFN- Baystreet)
USD / CAD - Canadian dollar counting down to employment reports.
- US NFP expected to rise by 180,000.
- Canada LFS forecast to rise 22,500.
- US dollar consolidates losses-CAD outperforms.
USDCAD: open 1.3741-45, overnight range 1.3728-1.3761, close 1.3738, WTI $82.40, Gold, $1989.09
The Canadian dollar is on a tear. Just a few days ago, the Loonie appeared to be on the brink of the abyss, and today it is flirting with a trend-changing rally. USDCAD traded at 1.3892 on Wednesday ahead of the FOMC monetary policy meeting and touched 1.3728 in Europe, overnight.
The change in sentiment occurred when traders and analysts decided that the Fed had finished hiking rates, and its next move would be a rate cut as soon as July 2024. That view roiled financial markets worldwide. Global equity indexes surged, and the US 10-year Treasury yield collapsed, falling from 4.95% on October 31 to 4.63% yesterday. The US dollar retreated with the US dollar index (DXY) plunging from 106.88, pre-FOMC to 105.89 today.
However, this year, the market has had a very poor track record predicting Fed moves. Last March, traders were convinced that Jerome Powell and company would be cutting rates as soon as September and definitely by year-end. They got that wrong, and it is probably too soon to be forecasting easier monetary policy by July 2024. That's because the FOMC statement was not overly dovish or bullish, and it reiterated that policy changes would be data dependent.
A key piece of data is released today. The October nonfarm payrolls report is expected to show a 180,000 increase in new jobs with the unemployment rate ticking up to 5.6% from 5.5%. An upside surprise would spark a US dollar rally.
The Canadian employment picture is also on display. The September Labour Force Survey is expected to show Canada added 22,500 jobs. A weaker than expected report combined with strong NFP data will drive USDCAD towards 1.3860.
EURUSD drifted in a 1.0615-1.0649 range overnight. ECB Executive board member Isabel Schnabel suggested further rate hikes were still possible, but traders ignored her comments.
GBPUSD traded in a 1.2173-1.2217 band. Yesterday, the BoE left rates unchanged and warned of a recession risk.
USDJPY traded narrowly in a 150.24-150.53 band with activity subdued because of a holiday in Japan.
AUDUSD traded with a bid in a 0.6420-0.6449 range supported by the stronger-than-expected Q3 retail sales data (actual 0.2% vs. forecast -0.3%).
In addition to NFP, ISM Services PMI (forecast 53, previous 53.6) is on tap.
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