Canadian dollar traders are awaiting the Statistics Canada release of the monthly employment report. This report tends to spark a flurry of FX volatility upon release but its impact on day to day trading fades within a couple of days. Today’s announcement will be the ninth report of 2019. Of those reports, seven surprised to the upside, and five of those surprise gains were substantial. The two reports that were below expectations were marginal.
Canada posted a gain of 136,800 jobs between August and September, substantially above the usual job gains for that period. For today, forecasters are predicting a gain of 15,900 jobs with the unemployment rate unchanged at 5.5%. However, the magnitude of the recent job totals raises the risk of a sharply weaker result. Many analysts question the sustainability of the employment gains and suggest that today’s threat is for a sharply weaker than expected result.
As previously noted, Canadian dollar price action is determined by external influences as well as domestic ones, and today is no different. The U.S. dollar is in demand. It rose yesterday and again overnight due to optimistic U.S./China trade expectations. Arguably, the Canadian dollar will respond more aggressively to disappointing employment data, then it will to a strong report.
U.S. dollar buyers came out of the woodwork in the past twenty-four hours. Traders responded to reports that China and US trade negotiators agreed to a phased-in rollback of trade tariffs and are hoping to have a deal completed by next Friday. However, other reports are suggesting that plans to roll back tariffs are meeting with serious opposition by other U.S. officials. U.S. dollar buyers may be getting ahead of themselves, especially since most analysts don’t believe any deal could be signed much before the end of December.
EUR/USD sellers were evident in Europe and modest selling occurred after Toronto opened. The single currency dropped from $1.1054 in Asia to $1.1027 in Toronto. European Central Bank Governing Council member Bostjan Vasle said the bank would continue with its current policy stance until conditions improve. The prospect of a rebound in U.S. economic growth from a repeal of tariffs while the euro-zone economy remains sluggish, fueled the selling.
GBP/USD continued to suffer from yesterday’s dovish Bank of England monetary policy stance. The BoE left rates unchanged, but there were tow dissenters who wanted to cut rates. The BoE is concerned about downside risks to the economy.
In Australia, a dovish Reserve Bank of Australia monetary policy statement reminded traders of that central banks bias to cut interest rates, which sent AUD/USD tumbling. NZD/USD followed Aussie lower.
U.S. Michigan Consumer Sentiment data is due today and forecast at 95.9 compared to 95.5 last month.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
