The Canadian dollar came under pressure again yesterday, as the U.S. dollar shrugged off month-end selling pressures. The U.S. dollar was in demand following robust U.S. data. Weekly jobless claims fell 51,000 to 364,000, and Institute for Supply Management Manufacturing Purchasing Managers' Index dipped to 60.6 from 61.2 in May due to supply chain issues.
The Canadian dollar traded lower overnight until profit-taking ahead of today’s Non-Farm Payroll data gave the currency a bit of a lift. Wall Street gained with the S&P 500, finishing with its 6th consecutive record close. Canadian dollar direction continues to be determined by U.S. dollar sentiment.
However, the surge in crude prices above $75.00/b should limit Canadian dollar losses.
The U.S. dollar is supported by upgraded GDP growth forecasts from the International Monetary Fund and the Congressional Budget Office (CBO) due to the strong recovery from the pandemic and expectations that President Biden’s spending plans will be approved. The CBO expects GDP to rise 7.4% in 2021, a steep upgrade to February’s forecast for 3.7% growth. In addition, the IMF raised its U.S. 2021 Gross Domestic Product forecast to 7.0% from 4.6% in April, which, if correct, would mark the fastest U.S. growth pace since 1984.
Yesterday Federal Reserve Bank of Philadelphia President said he was in the camp of starting tapering early, which kept that higher U.S. rate story alive, even though he doesn’t have a vote.
Today’s US non-farm payrolls data was expected to lead to a flurry of activity as the forecasts are all over the map. The consensus is for a gain of 700,000.
EUR/USD traded in a $1.1821-$1.1882 range since Thursday. Gains from higher than expected Eurozone Manufacturing PMI (actual 63.4 vs 63.1 in May) were reversed after better than expected US jobless claims and in anticipation of a robust NFP report today.
European Central Bank President Christine Lagarde repeated her concerns that the Eurozone recovery "remains fragile." The break below support at $1.1850 opens the door to steeper losses to $1.1705.
GBP/USD chopped lower since closing at $1.3833 on Wednesday, falling to $1.3739 in early New York trading today.
Overall U.S. dollar demand, rising COVID-19 cases and negative risk sentiment are weighing on GBP/USD. The downtrend from June 11 is intact below $1.3840 and targets $1.3670.
USD/JPY climbed from 111.00 to 111.62 yesterday and consolidated in a 111.35-111.65 range overnight. Traders have ignored the slide in US treasury yields as USDJPY is boosted by broad US dollar demand.
Today’s U.S. data includes NFP, Goods and Services trade balance, ISM Business Conditions Index, and Factory Orders. The bond market will close at 2 pm, and U.S. Markets are closed on Monday.
Canada Trade date data is on tap.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
