- Equites attempting a rally.
- Macklem suggests Canadian rates are not going lower
- US dollar opens with small losses.
USDCAD open: 1.3686, overnight range 1.3678-1.3725, close 1.3713, WTI 63.47, Gold 4879.76
The Canadian dollar traded sideways albeit with a modest bid in overnight markets.
Canada is forecast to have added about 7,000 jobs in January versus 8,200 in December, with the unemployment rate seen holding at 6.8%, although severe winter weather may have distorted the data.
Yesterday, Bank of Canada Governor Tiff Macklem cautioned that the economy is undergoing a structural shift rather than a routine cyclical slowdown. He blamed it on U.S. protectionism, slower population growth and the advance of artificial intelligence. He noted that growth is expected to be subdued, labour market adjustments uneven and productivity gains slow to materialize. He emphasised that monetary policy cannot resolve these forces, reinforcing expectations that Canadian interest rates will remain on hold for the foreseeable future.
WTI oil bounced around in a 62.32-64.58 range as US and Iran talks continue in Oman.
Thursday’s US jobs data showed a sharply higher increase in weekly jobless claims and a drop in job openings, clear evidence of a cooling job market. It may get even cooler. Amazon announced it was cutting 40,000 jobs while investing $200 billion to expand AI capabilities. US companies announced 108,000 layoffs in January.
Asian equities closed mixed, with Australia’s ASX 200 losing 2.03% due to fallout from the global tech stock plunge and soft commodity prices. Japan’s Topix rallied 1.28% in anticipation of new stimulus following Sunday’s election. Hong Kong’s Hang Seng lost 1.21% due to the fallout from the tech stock rout.
As of 7:30 am, European bourses are higher led by the German DAX has which is up 0.65%. The UK FTSE 100 has gained 0.20% and the French CAC 40 is nearly unchanged. S&P 500 futures have risen by 0.51%, the US Dollar Index is 97.83 and the 10-year Treasury yield is 4.201
EURUSD traded in a 1.1766–1.1802 range and firmed due to broad US dollar weakness following yesterday’s weak American data and a very content-sounding European Central Bank. President Christine Lagarde said the impact of the exchange rate gains is “incorporated into the baseline.”
German industrial production data was mixed, falling 1.9% m/m in December while the year-over-year figure beat expectations, although it remained negative at -0.6% y/y.
GBPUSD firmed in a 1.3509–1.3584 range and is sitting near the top of the band despite a somewhat dovish Bank of England policy meeting yesterday. The benchmark rate was left unchanged at 3.75% in a split decision and analysts are suggesting rates will be lowered in March.
USDJPY bounced in a 156.53–157.08 range and moved higher due to caution ahead of the February 8 election and modest but broad-based US dollar weakness.
AUDUS climbed in a 0.6897–0.6979 range and rallied as it erased yesterday’s losses. The RBA Governor explained the rationale for the latest rate hike from 3.60% to 3.85% to parliament, blaming the rise in inflation on low unemployment, higher incomes, lower interest rates, tax cuts and government spending. The intraday technicals are modestly bullish above 0.6910 and targeting 0.7050.
