US NFP and Canada LFS on tap
Canada and US markets closed on Monday
US dollar consolidates losses
USDCAD open: 1.3803 overnight range 1.3785-1.3806, close 1.3794, WTI 91.05, Gold 4,466.72
The Canadian dollar traded sideways in an uneventful overnight session. Today marks the unofficial start of the final long weekend of summer and traders will be more focused on leaving early then doing any work.
StatsCan gets to play a starring role today with the release of the August Labour Force Survey (LFS). The consensus calls for employment to increase by 15,000 after July's impressive 75,000 gain, while the unemployment rate is expected to hold at 6.4%.
The employment numbers could generate some initial market excitement, but their policy significance is questionable. The BoC only met on Wednesday, and its next rate decision isn't until October 28. For markets, the FOMC decision in two weeks is likely to be considerably more consequential.
WTI has spent the overnight session confined to $90.42-$92.16. Only eight ships have passed through the Strait during the past 24 hours, versus roughly 60 before Trump's war began. Meanwhile, US diesel prices have climbed to a record, exceeding the level reached after Russia invaded Ukraine. Apparently, this is what "energy dominance" looks like.
Friday's US nonfarm payrolls arrive at 8:30 am, with the consensus looking for a 56,000 increase in August after July's 23,000 decline.
Fed Governor Christopher Waller gave September rate-hike expectations another kick in the teeth Thursday, saying the recent improvement in inflation has left him more comfortable keeping rates at 4.0% rather than raising them on September 16.
Asian equity markets closed with Japan's Topix unchanged, Australia's ASX gaining 0.16% and Hong Kong's Hang Seng rose 1.74%.
At 7:30 am, in Europe, the French CAC 40 is down 0.13%, the Dax up 0.29%, while the FTSE 100 and S&P 500 futures are essentially unchanged. The 10-year Treasury yield is 4.763%, and the DXY is 99.07.
EURUSD drifted in a 1.1616-1.1633 range. German factory orders jumped 2.5% m/m in July and Eurozone retail sales fell 0.6% (forecast 0.3%). Traders also showed little interest in ECB Chief Economist Philip Lane's forecast for a sharp decline in inflation over the next 20 months or reports that ECB hawk Isabel Schnabel could leave early for a senior IMF position.
GBPUSD traded in a 1.3522-1.3548 range as the rally once again ran into resistance around 1.3550, the ceiling that has contained the pair since Tuesday. Sterling remains 0.51% above last Friday's close. BoE Chief Economist Huw Pill backed an immediate 25bp increase to 4.0%, arguing that higher rates are needed to contain inflation risks associated with Trump's conflict with Iran.
USDJPY traded through a 155.30-156.58 range and recovered some ground overnight following its steep two-day decline. Expectations for a 25 bps BoJ increase on September 18 continue to weigh on the pair, while yesterday's call from a board member for a much larger 50 bp increase added another layer of yen support.
AUDUSD consolidated within a 0.7194-0.7215 range and remained close to 0.7200 as broad US dollar weakness continued to provide support. Australia's stronger-than-expected second-quarter growth has increased the likelihood of another RBA rate increase, while Waller's comments have simultaneously reduced expectations for a September Fed hike. For now, the Aussie appears content to wait for the US employment numbers before choosing its next direction.
