- Canada expected to have added 25,000 new jobs in October.
- Fed cuts rates by 25bps as expected.
- US dollar gives back some of this week’s gains.
USDCAD: open 1.3891 overnight range 1.3858-1.3905 close 1.3863, WTI $71.09, Gold, $2688.85
The Canadian dollar is lost ground compared to yesterday’s closing level and added to the losses in early New York ahead of the Canadian employment report.
Today’s Canadian Labour Force Survey is expected to show Canada gained 25,000 new jobs in October while the unemployment rate rises to 6.6% from 6.5%. Arguably, a weaker than expected result will have a bigger and more lasting impact on USDCAD then an upside surprise. That’s because steep job losses ensure an aggressive BoC monetary policy response while the risk of Trump tariffs will offset any upside surprise.
The Fed followed through with an anticipated 25 bp rate cut to 4.75%. While this action was widely expected, the accompanying statement hinted at a slightly less dovish stance, as it removed language from October that had expressed "confidence in inflation moving sustainably toward the 2% target." Chair Powell noted that the Committee remains untroubled by rising bond yields and is continuing its process of adjusting away from relatively restrictive rate levels.
China’s Ministry of Finance announced a massive $1.3 trillion program to alleviate local government debt woes. It wasn’t much of an announcement as many of the measures had be announced earlier. The hope is that the measures will allow local governments to increase stimulus measures. Unfortunately, markets were unimpressed as it doesn’t seem enough to counteract Trump’s new proposed tariffs.
EURUSD weakened after the Fed's announcement, settling within a 1.0761-1.0806 range. Overnight, some gains were likely driven by profit-taking as traders absorbed the impact of Trump’s victory and the Fed’s rate cut; however, lingering political uncertainty in Germany kept gains restrained. Trading is expected to be choppy between 1.0750 and 1.0700 until the 10:00 am option expiry, which will see $4.9 billion in options expire.
GBPUSD maintained a slight upward bias, trading between 1.2936 and 1.2990. The Bank of England’s anticipated 25 bp rate cut to 4.75% came as expected, though officials hinted at a more cautious approach to future cuts. Concerns that recent budget measures could fuel inflation led analysts to rethink the likelihood of another rate cut in December.
USDJPY continued its decline after the FOMC, slipping from 153.37 to 152.14 due in part to profit-taking after post-election gains and likely pressure from Japanese officials’ verbal interventions. Key support is at 151.67, aligned with the 200-day moving average.
AUDUSD saw a defensive tone, falling from 0.6682 to 0.6623 due to a mix of pre-weekend profit-taking and subdued market reactions to China’s latest stimulus plan. Added pressure from Trump’s tariff threats weighed on the currency.
Today’s US data includes the Michigan Consumer Sentiment Index.
