The Canadian dollar rallied following Friday’s U.S. employment report, then consolidated its gains overnight.
The non-farm payrolls data showed a gain of 850,000 jobs, which easily beat the forecast for a 700,000 increase.
However, the details were disappointing as almost all the gains were in sectors that were the hardest hit by the pandemic. Also, the unemployment rate ticked higher to 5.9%. The result was analysts downgraded expectations that the Fed would be forced to begin tapering Quantitative Easing purchases ahead of schedule.
USD/CAD dropped from a pre-NFP level of $1.2450 and hit $1.2314 in Asia. The steep plunge was due to broad U.S. dollar selling pressures, as analysts re-evaluated their Federal Open Market Committee outlook. In addition, West Texas Intermediate (WTI) oil prices are trading above $75.00/ barrel. The meeting of the Organization of the Petroleum Exporting Countries has been extended due to a difference of opinion between the United Arab Emirates (UAE) and Saudi Arabia over crude production levels. The UAE is demanding an increase to its baseline production quota, which Saudi Arabia opposes.
U.S. markets are closed as America celebrates its Independence Day. Asia markets were quieter than usual, and the major Asia equity indexes closed on a mixed note. Caixin China Services PMI at 50.1 was below the 55.1 expected, which caused some concern about the strength of the global recovery. European stock markets are trading quietly but are modestly higher. Wall Street equity futures are flat.
EUR/USD traded in a $1.1852-$1.1880 range, with prices supported by post-NFP U.S. dollar selling pressures, and better than expected Services and Composite PMI data. The move above 1.1840 turned intraday FX sentiment positive with a break above $1.1880, targeting $1.1950.
GBP/USD enjoyed a steep post-NFP rally, rising from 1.3735 Friday, to 1.3860 today. The gains are fueled by robust June Services PMI data, and UK government plans to fully open the economy by July 19.
USDJPY dropped from 111.65 Friday to 110.81 today, with falling 10-year Treasury yields and increased support for Federal Reserve Chair Jerome Powell’s monetary policy outlook, weighing on prices.
AUD/USD rallied along with the G-10 major currencies. However, gains may be capped tomorrow’s Reserve Bank of Australia monetary policy statement is dovish.
The quarterly Bank of Canada Business Outlook Survey is released today and expected to show an upbeat outlook.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians