- China cuts RRR rate as of December 15
- Bank of Canada meeting Wednesday
- CAD outperforms as US dollar higher vs majors
USDCAD Open 1.2797-01, Overnight Range 1.2787-1.2841, Previous close 1.2845, WTI open $67.96, Gold open $1782.44
The Canadian dollar started this week as the best performing G-10 major currency against the US dollar. It is benefitting from a rebound in oil prices from Friday’s low and a delayed reaction to Canada’s stellar employment report.
Canada gained 153,700 jobs in November easily surpassing the consensus forecast for a 35,000 gain. The data shows the domestic economy is booming, and along with strong GDP growth and high inflation, argues for a hawkish Bank of Canada (BoC) monetary policy statement Wednesday.
However, they BoC may opt to stay on the sidelines due to the uncertainty around the Omicron variant.
The US nonfarm payrolls report garnered all the attention. The headline number was sharply lower than expected but the details were strong. The results from September and October were revised higher, and the unemployment rate plunged to 4.2%. The results cemented expectations for higher rates sooner than expected.
Friday, oil prices plunged from $69.18/barrel to $65.60/b on Friday, which offset Canada’s good news employment report and left USDCAD probing resistance in the 1.2750 area, which held. USDCAD retreated in Europe after Saudi Arabia announced it would increase oil prices to Asia clients effective January 1.
Omicron variant fears eased somewhat, helped by US Chief Medical Advisor to the President Dr Fauci, who said “Though it’s too early to really make any definitive statements about it, thus far it does not look like there’s a great degree of severity to it,”
EURUSD traded sideways in a 1.1275-1.1320 band. German Factory Orders fell 6.9% m/m in October, much weaker than expected, which weighed on prices. EURUSD technicals are bearish below 1.1350, with negative sentiment exacerbated by the stubbornly dovish ECB outlook.
GBPUSD rebounded overnight, rising from 1.3224- to 1.3284 with gains limited by ongoing Brexit uncertainty. The intraday technicals are bearish while prices are below 1.3310.
USDJPY bounced from 112.74 to 113.36 with the rebound in US 10 year treasury yields.
AUDUSD and NZDUSD underperformed, with both currency pairs weighed down by the risk of higher US interest rates. The RBA monetary policy meeting is tomorrow, and policymakers are expected to leave rates and guidance unchanged.
There are no US or Canadian economic reports on tap today.
