The Canadian dollar is biding its time until this morning’s U.S. data dump. The ADP and weekly jobless claims will provide some insight as to what to expect from Friday’s non-farm payrolls report.
Asia equity indexes closed moderately higher, although not those in China. The main Chinese indexes slumped due to U.S. President Joe Biden’s plan to add entities in defence and surveillance to the U.S. blacklist of Chinese controlled or affiliated with the Chinese military. Prices also slumped because the China Caixin Services Purchasing Managers Index data was below expectations.
European bourses are trading with losses, in part due to concerns the Fed may begin tapering Quantitative Easing, sooner, rather than later. Dow Jones Industrial Average and S&P 500 futures are in the red, suggesting a negative open on Wall Street.
An undercurrent of tapering fears ripples through U.S. markets after Philadelphia Fed President Patrick Harker broached the subject of tapering.
The non-voting Federal Open Market Committee member said, "We’re planning to keep the federal funds rate low for long, but it may be time to at least think about thinking about tapering our $120 billion in monthly Treasury bond and mortgage-backed securities purchases." That comment is hardly a call to action, but it made traders nervous.
EUR/USD traded quietly in Asia then dropped from $1.2213 to $1.2180, even though Eurozone Markit Services and Composite PMI data were better than expected. Bullish EUR/USD sentiment is underpinned by improving outlook for the Euro area economy thanks to supportive economic data, and waning coronavirus fears. However, European Central Bank President Christine Lagarde reinforced the central banks dovish outlook, saying they are committed to maintaining favourable financing conditions.
GBP/USD bounced to $1.4202 from $1.4145 after Services PMI beat estimates (62.9 vs 61.8 in April).
The Canadian dollar trades choppily inside a $1.2000-$1.2100 range. Rising oil prices continue to cap gains, while solid support in the $1.2000-$1.2010 area limits losses.
Traders are awaiting the U.S. and Canadian employment reports tomorrow. Canada is expected to have lost 20,000 jobs due to the third-wave coronavirus outbreak.
FX trading may get a little noisy when U.S. weekly jobless claims, and ADP employment data are released at 8:30 a.m. EDT. The U.S. Institute for Supply Management Services PMI report is due at 10:00 am EDT.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians.
