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USD / CAD - Canadian dollar gains lag those of G-10 majors

- Markets cautious ahead of Canadian and US jobs reports

- WTI underpinned by talk of a Russia seaborne oil price cap deal

- US dollar remains on the defensive ahead of NFP

USDCAD snapshot open 1.3436-40, overnight range 1.3423-1.3451, close 1.3432, WTI $81.13, Gold $1800.28

The Canadian dollar failed to extend gains overnight despite US dollar weakness against the other major G-10 currencies.

The Canadian dollar underperformance may be due to speculation that the Bank of Canada is close to reaching its “terminal” or peak overnight rate, which is thought to be at 4.25%. That is well below the estimate for the Fed peak rate which is around 5.0%. The yield differentials favour US dollars over Canadian.

The Canadian dollar is also underperforming due to soft oil prices. West Texas Intermediate has dropped over 20% in November and prices are struggling to make gains despite talk that China’s economy may reopen sooner than expected and Opec production cuts.

The G-7 are reportedly close to an agreement for a $60.00/b cap on Russian seaborn crude. Opec is waiting in the wings to decide if they will announce another production cut or wait to see how a cap (if any) impacts crude prices.

FX markets trades cautiously overnight ahead of today’s US nonfarm payrolls report. There is a lot riding on this data as a result of Fed Chair Powell’s November 30 speech when he announced the pace of rate hikes would slow starting in December.

US nonfarm payrolls report is expected to show a gain of 200,000 jobs in November (Oct. 261,000) with Wednesday’s weaker than expected ADP data suggesting downside risks to the forecast. The hourly earnings component may get extra attention as the Fed will want to earning growth to slow.

The employment report data will aggravate “Fed Pivot” chatter.

USDCAD traders are keeping an eye on Canada’s November employment report. It is expected to show a gain of 5,000 jobs, well below October’s 108,300 gain with the unemployment rate rising to 5.3% from 5.2%. The results will only have a fleeting, if any, impact on USDDCAD trading as it is the US market that drives USDCAD price direction.

EURUSD traded sideways in a 1.0506-1.0544 range, supported by broad US dollar weakness and a drop in October Eurozone PPI.

GBPUSD is at the top of its 1.2227-1.2297 range supported by positive developments around a new North Ireland Brexit deal.

USDJPY dropped to 133.63 from 135.59 after the 10-year US Treasury yield slid to 3.055% from 3.64% on Thursday.

AUDUSD and NZDUSD are modestly higher due to general US dollar weakness.