The Canadian dollar recouped some of its recent losses overnight. A rebound in West Texas Intermediate (WTI) oil prices, improving global risk appetite, and hopes for a stellar Canadian employment report lifted the currency.
The consensus forecast for Canada’s June Labour Force Survey is a gain of 195,000 jobs, and a drop in the unemployment rate to 7.7% from 8.2%. The massive jump in jobs is because economies across the country reopened. Even, so, the forecast gain would not be enough to recovery the 275,000 jobs that disappeared in April and May. In addition, the Ontario economy remained shuttered in June, which poses downside risks to the forecast.
The Canadian dollar garnered additional support after oil prices climbed from a low of $70.83/barrel yesterday to $73.90/b overnight. The 4.3% gain was due to shrinking US crude inventories. The American Petroleum Institute reported crude inventories fell 7.93 million barrels in the week ending July 2.
The Peoples Bank of China (PBoC) surprised markets when they cut their benchmark interest rate, raising concerns about the strength of the global economic recovery. The PBoC trimmed the RRR rate by 0.50% to a weighed average of 8.90%
Venice, Italy, has a tourist problem. There are too damn many. The problem is exacerbated today and this weekend as the G-20 Finance Ministers and their entourages descend on the city. The G-20 draft communique says they “will continue to sustain the recovery and avoid any premature support withdrawal.” It also calls for a global tax discussion to resolve outstanding issues and design a detailed plan for implementation at the October meeting. Rabobank estimates the G-20 blew a collective $8.0 trillion during the pandemic. Now, the Finance Ministers want to get some money back.
EURUSD is grinding higher, rising from $1.1826 to $1.1860 in early New York trading, with prices supported by the narrowing of German and US interest rate differentials. However, gains may be limited due to lingering concerns that the spreading COVID-19 delta variant may derail the global economic recovery. In addition, the ECB is sticking to its dovish policy stance.
AUD/USD underperformed against its Kiwi cousin due to concerns about China’s growth outlook and by spreading COVID-19 outbreaks in Australia. NZD/USD is underpinned by expectations for a rate hike in November.
The U.S. data calendar is empty.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians