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USD / CAD - Canadian Dollar awaiting US and Canada jobs data

- Canada expected to add 22,500 jobs, US forecast to gain 185,000 jobs.

- ECB’s hawkish rate cut leaves EURUSD unchanged.

- US dollar trading with negative bias ahead of NFP.

USDCAD: open 1.3683, overnight range 1.3664-1.3712, close 1.3671, WTI $75.59, Gold, $2338.85.

The Canadian dollar managed to survive Wednesday's Bank of Canada rate cut mainly because Bank of Canada Governor Tiff Macklem had tipped his hand about such a move at the beginning of May, and the cut was already reflected in the exchange rate. Furthermore, the BoC indicated that additional rate cuts would be data-dependent, which suggests that today's Canadian employment report carries a little more weight than usual.

The Canadian Labour Force Survey is expected to show an increase of 22,500 jobs in May, but that is a far cry from the 90,400 result in April. The unemployment rate is expected to rise to 6.2% from 6.1%. Some analysts expect an upward surprise to the numbers because of job vacancies being rapidly filled due to the massive surge of new immigrants.

However, it is the US nonfarm payrolls data that will move markets. NFP is expected to have risen by 185,000 in May. If so, it will encourage speculation that the FOMC will cut rates in September. US rate cuts may just be wishful thinking, as prior to the FOMC meeting blackout period, policymakers seemed united in their views that rates would remain restrictive for most of the year. However, economists at JP Morgan Chase and Citibank think that a weak NFP report today will herald a July rate cut.

EURUSD reached 1.0902 after the ECB cut rates yesterday, but that was as good as it gets ahead of today’s US employment report. EURUSD traded narrowly in a 1.0883-1.0899 range overnight, and none of the many speeches and comments from ECB policymakers were able to spark any action. The various speakers, including Martins Kazak and Joachim Nagel, warned of gradual rate cuts and stressed the risks to the outlook.

GBPUSD traded quietly in a 1.2781-1.2802 range with traders awaiting direction from the US jobs data. UK House Prices rose 1.5% y/y in the three months ending in May but were not a factor for traders.

USDJPY bounced around in a 155.12-155.94 range with prices weighed down by soft US Treasury yields. The 10-year Treasury yield is sitting at 4.30%. Japanese foreign reserves fell to US $1.2316 trillion from $1.2790 trillion at the end of April, which Finance Minister Shunichi Suzuki said was partially due to FX intervention.

AUDUSD gave back early gains and traded quietly in a 0.6660-0.6682 range. Traders were content to await today’s US employment data.

NZDUSD traded similarly and drifted in a 0.6187-0.6204 range.