USD/CAD - USD/CAD in mid-$1.28’s even as oil price rises

The Canadian dollar fell again on Thursday as local media reflected further on the more dovish comments in the Bank of Canada Statement. It drew no support from an oil price which rallied around 70 cents on the day and this morning has just jumped $57.45. Nor did it benefit from the latest data from the construction sector. A 3.5% m/m increase in October building permits far exceeded consensus forecasts for a gain of 1.5% whilst September was upwardly revised to 4.9% from a previously reported 3.8% rise.

Non-residential building permits jumped 5.5%, led by intentions for commercial buildings, as Quebec and Ontario planned more warehouses and office buildings. Both provinces have seen their unemployment rates fall as their economies have picked up. Permits for industrial buildings also rose 14.2% on construction intentions for factories and plants in Alberta, which is recovering from the oil price shock two years ago. As for the purchasing managers survey, this shrank only very modestly from 63.8 to 63.0 in November whilst the gauge of employment rose to an adjusted 53.9 from 52.0, boding well for further job gains. As with the New Zealand dollar, the Canadian dollar did what it did on Thursday despite the data, not because of it. The loonie opens in North America this morning at $1.2850 U.S. and GBP/CAD $1.7307 ahead of data this afternoon on housing starts and capacity utilization.

USD/CAD: Expected Range: $1.28 -- $1.289

The week isn’t yet over but so far, the U.S. dollar has gone up for four-and-a-half days. As we saw last Friday, it would be premature to celebrate too soon and a lot can happen in the final session of the week, especially one which brings the latest U.S. labour market report. Ahead of this, the week ending December 2 (which isn’t covered by today’s data) brought the third straight decline in claims and was the 144th consecutive week that claims remained below the 300,000 threshold. That is the longest such stretch since 1970, when the labour market was, of course, much smaller.

According to a Reuters survey, non-farm payrolls probably increased by 200,000 in November after surging 261,000 in October. Job growth in October was boosted by the return to work of thousands of employees, mostly in low-wage industries like hospitality and retail, who had been temporarily dislocated by Hurricanes Harvey and Irma. The unemployment rate is expected to remain steady at 4.1%. The US Dollar index has extended its gains to be up at 93.67; the highest level since November 21 and the S+P 500 index needs to add only another 15 points to be at a fresh all-time high. Assuming payrolls and earnings numbers close to consensus estimates and in the absence of any external shock, the U.S. dollar should continue to find support

EUR/CAD: Expected Range: $0.6595 -- $0.6665

The euro has had a very poor week and is lower again this Friday morning. Once again, it is hard to pin the blame for its decline on incoming economic data. Yes, Germany’s trade surplus was lower than consensus estimates and fell to a three-month low of 'just' €19.9 billion but French production rose 1.9% from September in the biggest monthly increase in six months. It followed an increase of 0.8% in September, which was revised up from the 0.6% originally reported.

The pharmaceutical industry saw output surge 8.2% in October while car production jumped 5.7%, helping to offset a slowdown in refining. The October result beat not only the average forecast of a decrease of -0.1% m/m, but also topped the highest individual estimate in the Reuters survey which was for an increase of 0.5%. None of this has helped the euro, which is down more than half a cent against the greenback over the past 24 hours to $1.1737 U.S. and is 120 pips lower than where it began the week. It is now below its 20-, 50- and 100-day moving averages and if it breaks below $1.1720, it would target the early November low of $1.1568. EUR/CAD, meantime, opened in North America around $1.5080; almost exactly where it finished at the end of last week.

GBP/USD: Expected Range: $0.5755 -- $0.5815

After a very eventful, indeed dramatic, week of political negotiations between London, Dublin and Brussels, U.K. Prime Minister Theresa May met with European Commission President Jean-Claude Juncker this morning to sign off a 15-page "progress report" that will allow European Union negotiators to recommend opening a second phase of talks on post-Brexit relations. According to the formal Statement, "The European Commission has today recommended to the European Council (Article 50) to conclude that sufficient progress has been made in the first phase of the Article 50 negotiations with the United Kingdom. It is now for the European Council (Article 50) on 15 December 2017 to decide if sufficient progress has been made, allowing the negotiations to proceed to their second phase…. In line with the Guidelines of 29 April 2017, and once the Member States agree with the Commission’s assessment, the Commission stands ready to begin work immediately on any possible transitional arrangements and to start exploratory discussions on the future relationship between the European Union and the United Kingdom.”

In plain English, phase two of the Brexit negotiations can now get underway. The good news for the pound sterling is that a collapse of the talks has been averted and hopes for a two-year transitional deal post-2019 are very much alive. Whether this is good enough to sustain the GBP at current levels remains to be seen and may well depend on the reaction of the Government’s own MP’s over the weekend. The trading day begins in North America with the GBP at $1.3460 U.S. with GBP/CAD at $1.7290.

CAD/AUD: Expected Range: $1.033 -- $1.0395

The Australian dollar is having a bad week, with plenty of reasons to justify the currency’s weakness. Poor Gross Domestic Product figures, then, a disappointing set of trade numbers have pulled the rug from under the Aussie at a time when we’re already seeing signs of softness in consumer confidence, wages and the residential property market. That’s a pretty long list of negative factors even before we factor in an inquiry into the country’s major banks.

On Thursday, AUD/USD fell from $0.7566 in Sydney to end the Northern Hemisphere day in New York at a five-month low of $0.7507. Overnight it couldn’t get much support either from better than expected home loans data (a -0.6% m/m drop beat consensus forecasts of a -2.5% fall) or from much better China trade figures which are often seen as a bellwether for the global economy in general and Australia in particular. China’s exports in November rose 12.3% y/y, the fastest pace in eight months, led by strong sales of electronics and high-tech goods, while commodity purchases helped imports grow 17.7%. AUD/USD opens in North America around $0.7510 U.S. but the old technical support point of $0.7540 now becomes an area of upside resistance. AUD/CAD, meantime opens at $0.9650.

NZD/USD: Expected Range: $1.135 -- $1.144

The New Zealand dollar had a poor day on Thursday even though – as in Canada – the economic data this week have been pretty good. The job vacancy numbers Tuesday were sound and Wednesday investors learned that building activity in the Wellington region grew strongly over the past year. Yesterday, Stats NZ reported that seasonally adjusted total wholesale trade sales value rose 1.1% in the September 2017 quarter, after rising 1.6% n the June 2017 quarter.

This was the sixth consecutive quarterly rise, driven mainly driven by fruit exports and grocery wholesaling. With a half decent dairy auction too, after four consecutive declines, it would have been reasonable to expect the NZD to outperform the AUD but that’s not how it turned out. NZD/USD ended the New York session at its low of the day at $0.6825 U.S. Overnight, we have seen the last of the so-called ‘partial data’ which feed in to the GDP data as Stats NZ released the survey of manufacturing for the September quarter. This shows the volume of manufacturing sales rose 0.3% in Q3, after a 1.0% rise in the June 2017 quarter. Of the 13 manufacturing industries, seven fell and six rose in the latest quarter. NZD/USD opened in North America this morning around $0.6840 with NZD/CAD at $0.8790.