- Risk sentiment positive in Asia, less so in Europe
- Russia unhappy with G-7 oil price cap
- US dollar consolidating Friday’s post NFP losses
USDCAD snapshot open 1.3433-37, overnight range 1.3387-1.3472, close 1.3472, WTI $81.70, Gold $1795.32
The Canadian dollar rallied to start the Asia session then reversed course and climbed from a USDCAD low of 1.3387 to 1.3472 (where it closed Friday) in early European trading. Prices retreated again and USDCAD opened exactly where it started the US session Friday.
So, much ado about nothing.
But it wasn’t nothing. The Canadian employment report was stronger than expected with Canada adding 10,100 jobs in November, easily beating the forecast of a 5,000 gain. The unemployment rate ticked lower to 5.1% while wages remained firm at 5.6% y/y.
The result merely muddled the outlook for the Bank of Canada monetary policy meeting on Wednesday. RBC economists expect a 25 bp rate increase, BMO is calling for a 50 bp bump, and CIBC believes it’s a coin toss between 25 or 50 bps.
The Canadian dollar did not see much benefit from the rise in West Texas Intermediate (WTI) oil prices from $80.02 to $82.36/b overnight. The gains were due to reports of China easing covid restrictions in many large cities which raised hopes for a jump in crude demand. However, gains were capped by the G-7 agreeing to cap Russia’s seaborne crude prices at $60.00/b. Analysts believe the cap will help lower prices around the world.
The US nonfarm payrolls report was a different animal. It was stronger than expected, rising 263,000, compared to the 200,000 forecast. Most analysts believe the Fed will raise rates by 50 bps on December 14. However, for some, the forecast view shifted overnight after an article in the Wall Street Journal suggested that elevated wage pressures raised the risk for a 75 bp bump.
EURUSD traded in a 1.0518-1.0584 range. Eurozone PMI and Retail Sales were weaker than forecast as were German Services PMI data which weighed on the single currency. also disappointed forecasters, but the news shouldn’t have surprised anyone, due to the war and energy crisis. ECB officials provided some support suggesting ECB rates would rise 50 bps this month.
GBPUSD traded in a 1.2267-1.2343 range overnight with prices tracking broad US dollar moves. Composite PMI and Service PMI data results were close to expectations.
USDJPY rallied in a 134.14-135.54 range despite the US 10-year Treasury yield remaining in the 3.505% area.
AUDUSD traded in a 0.6769-0.6850 range supported by the easing of covid restrictions and China. The RBA is expected raise the OCR rate to 33.10% tomorrow, a 0.25% increase.
US ISM Services PMI and Factory orders are due.
