- Global risk sentiment improves
- Canadian dollar shrugs off weak employment report
- US dollar starts week on mixed note, EUR outperforms
USDCAD Snapshot open 1.2987-91, overnight range 1.2980-1.3052, close 1.3023, WTI oil $87.66, Gold $1725.61
The Canadian dollar rally stalled at resistance following a “risk-on” overnight session. Global risk sentiment may have been positive, but traders were cautious.
Canada’s August employment report was worse than expected. Friday, Statistics Canada reported 39,700 jobs disappeared in August (forecast 15,000), while the unemployment rate jumped to 5.4% from 4.9% in July.
Usually, when this report deviates sharply from forecasts, the Canadian dollar either sinks or soars.
Not this time. Traders do not believe the August results will do anything to dissuade the Bank of Canada from raising interest rates by 50-75 basis points on October 27, and that move is priced into the currency.
The Canadian dollar direction was determined by risk sentiment as measured by S&P 500 index moves. The S&P 500 closed at 4067.36 Friday for a gain of 1.53%. The futures market extended those gains overnight, with equity traders believing that the risk of US interest rates reaching 4.0% is reflected in the price.
Asian equity markets were quiet because of the Chinese Mid-Autumn Festival holiday, which also closed markets in Hong Kong. South Korea was also closed for an Autumn holiday.
Japan’s Nikkei 225 index closed with a 1.16% gain, while Australia’s ASX 200 finished 1.02% higher. European bourses are firmer, led by a 1.54% rise in the German Dax index.
Gold and oil prices are modestly higher compared to Friday’s NY close, while the US 10-year Treasury yield hovers around the 3.30% level.
EURUSD traded in a 1.0061-1.0097 range overnight but slipped to 1.00142 in NY trading. Prices are supported by expectations for another 75 bp rate hike in October, which was reinforced by comments from ECB policymaker Luis de Guindos. He said, “We decided to raise rates by 75 basis points and have announced that we’ll continue to raise. How many times we do so and by how much will depend fundamentally on data.”
GBPUSD is trading at the top of its overnight 1.1599- 1.1697 range fueled by broad US dollar weakness and expectations for an aggressive Bank of England rate hike at the September 22 monetary policy meeting.
USDJPY retreated from 143.49 to 142.08 before grinding back to 142.50 in NY due to broad US dollar weakness and speculation about Bank of Japan FX intervention to limit yen weakness.
AUDUSD and NZDUSD recovered from weakness at the Asian open and climbed on the back of positive risk sentiment. AUDUSD traded in a 0.6811-0.6887 range while NZDUSD bounced in a .06262-0.6154 band.
There are no US or Canadian economic reports today.
