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USD / CAD - Canadian dollar sinking

- Risk sentiment turns negative after weak Chinese trade data.

- High Treasury yields impair risk sentiment.

- US dollar opens firmer today but is mixed since Friday.

USDCAD: open: 1.3438-42, overnight range 1.3336-1.3475, close 1.3381, WTI $80.73, Gold $1935.47.

The Canadian dollar is under pressure. It started Friday after the employment data was weaker than expected and then really started to percolate overnight when Chinese trade data missed forecasts.

Canada lost 6,400 jobs in July compared to the consensus forecast for a gain of 21,000. The results suggest that the previously tight Canadian job market has eased in the footsteps of the Bank of Canada’s 475 basis points of rate hikes since March 2022. This result, combined with the June inflation data showing CPI fell into the Bank’s targeted 1-3% range suggests that the Bank of Canada will not be raising rates any higher.

Meanwhile, the US nonfarm payrolls report was also lower than expected. The US added 187,000 jobs in July, a tad less than the 200,000 expected but far below the average of 270,000 between January and June. Some analysts are suggesting that the jobs data is further evidence of a “soft-landing” for the US economy.

Attention shifted back to the US Treasury market in the wake of the Fitch downgrade and the upcoming $103 billion of 3, 5 and 10 year bond sales by the US Treasury this week.

EURUSD has maintained a range-bound movement between 1.0966 and 1.1017 since the conclusion of trading in New York on Friday. Traders are currently grappling with uncertainty, and not even the announcement of Italy's intentions to introduce a tax on "excess bank profits" has triggered any significant market response. The latest data for Germany's Harmonized Index of Consumer Prices (HICP) aligned with expectations, registering a year-on-year increase of 6.5%.

In the case of GBPUSD, trading activity has adhered to a range spanning 1.2713 to 1.2785 since Friday's closing session. Notably, prices have dipped to session lows in New York today, reflecting widespread demand for the US dollar.

Meanwhile, USDJPY underwent an ascent from its Asian low of 141.52 yesterday to reach 143.43 shortly before the New York market opened today. Traders are intently focused on the potential for elevated US Treasury yields due to the US Treasury's upcoming bond sale.
Recent intervention by the Bank of Japan (BoJ) in the Japanese Government Bond (JGP) market serves as an indication that Japanese rates are unlikely to rise in the immediate future.

Conversely, AUDUSD has exhibited lackluster performance, largely attributed to disappointing Chinese data. The currency pair now finds itself at the lower end of its established range, which extends from 0.6508 to 0.6593 since Friday's close.

Although no significant US data reports are slated for release today, noteworthy speeches are expected from Fed officials Patrick Harker and Thomas Barkin.