– BoC governor undermines Loonie
– US NFP show a gain of 250,000 jobs in September
– US dollar trades sideways in quiet overnight session
USDCAD snapshot: open 1.3706-10, overnight range 1.3706-1.3759, close 1.3747, WTI $89.20, Gold $1712.83
The Canadian dollar consolidated yesterday’s losses in a somewhat choppy, but thin overnight session
Fed policymakers continued to push back against the “Fed-pivot” theory that has gained a foothold in market risk sentiment.
Cleveland Fed President Loretta Mester repeated hawkish comments yesterday saying, “We have to be singularly focused on inflation If we want to get back to healthy conditions, this is something we have to do.” One of her newest colleagues Governor Lisa Cook said that inflation remained stubbornly higher with inflation pressures broad based.
Those and other remarks from Fed officials helped lift the US dollar and Treasury yields while driving equity prices lower.
Bank of Canada Governor Tiff Macklem’s speech in Halifax yesterday didn’t do the Canadian dollar any favours.
Mr Macklem warned that even though supply chain constraints were easing, it may not benefit Canadians. He said improving global factors may take time to filter through to Canadian inflation and even when they do, the recent depreciation of the Canadian dollar will offset some of the improvement.
He went on to complain that interest rate hikes which usually lead to Canadian dollar appreciation are not occurring. “What that means is that other things equal there is going to be more to do on interest rates. We are going to take those exchange rate movements into account going forward in terms of what we need to do on interest rates.”
Opportunistic FX traders may sell the Canadian dollar to see how far it will fall before the BoC hikes rates.
It is employment data day in Canada and the US
Canada is expected to have added 20,000 new jobs in September which will be overshadowed by the US data.
The US is expected to gain 250,000 jobs, average hourly earnings steady at 0.3%, with the unemployment rate unchanged at 3.7%. If the job gains exceed the forecast, the US dollar will rally as it signals the US economy is strong enough to withstand additional Fed rate hikes.
Lower than expected job gains will get “Fed pivot” fans excited leading to a softer US dollar and higher equities. That scenario implies traders completely ignore all the comments from Fed officials yesterday.
Overnight, FX markets consolidated yesterday’s losses as traders awaited today’s US employment report.