- Friday’s US data changes the narrative of the Fed outlook
- US 10-year Treasury yield soars
- US dollar hangs on to Friday’s gains.
USDCAD snapshot open 1.3439-44, overnight range 1.3399-1.3444, close 1.3402, WTI $73.91, Gold $1872.02
The Canadian dollar is trapped. It continues to attempt to break out of a slowly narrowing range but support and resistance levels thwart every try. A large part of the reason for the lack of success is that Canadian dollar moves are determined by broad US dollar sentiment against the major G-10 currencies which is constantly shifting.
Friday the US January nonfarm payrolls report surprise markets with a whopping 517,000 increase in jobs. The consensus forecast was for a gain of 185,000. The surprisingly strong report forced traders to re-evaluate their outlook for US interest rates. The US economy appears to be far more resilient than forecasters expected which suggests the market erred in believing that Fed Chair Powell’s hawkish rate outlook was unnecessary.
USDCAD soared from 1.3350 when NY markets opened to 1.3446 in early trading today. However, the rally stalled at the downtrend line from the beginning of January, leaving USDCAD rangebound in a 1.3240-1.3450 band.
Canadian dollar traders may get some direction on Tuesday after Bank of Canada Governor Tiff Macklem’s speech in Quebec city. The Governor will talk about “how monetary policy works,” but he is not expected to deviate from his January 23, post-monetary policy meeting comments. Also, the first ever release of the minutes from that meeting are on Wednesday.
Traders continued to digest the ramifications from Friday’s stronger than expected NFP and ISM services data in a nervous overnight session to rising US China tensions.
EURUSD traded in a narrow 1.0758-1.0798 with hawkish comments from ECB policymakers helping to offset the latest hawkish Fed outlook.
GBPUSD traded defensively in a 1.2023-1.2076 range. Prices got a bit of support from BoE policymaker Catherin Mann who left the door open to further rate hikes because of upside risks to the BoE inflation outlook.
USDJPY traded with a bullish bias in a 131.53-132.55 range due to higher US Treasury yields and rumours that the next BoJ governor would be as dovish as the outgoing governor.
AUDUSD traded in a 0.6891-0.6947 band due to US dollar strength with traders awaiting the RBA to announce a 25 bp rate hike tomorrow.
The US data calendar is empty.
