The Canadian dollar rally stalled. Prices consolidated in a USD/CAD range of $1.3198-$1.3233 range overnight ahead of today’s employment reports from the U.S. and Canada. Statistics Canada noted a jump of 81,000 new jobs in August. Analysts forecast a 15,000-unit increase, a substantial improvement from July when Canada lost 24,200 jobs.
Even so, the Canadian jobs report may get lost in the frenzy of the U.S. non-farm payroll (NFP) results -- which registered a disappointing hike of 130,000 jobs last month, a substantial deviation from the forecast increase of 158,000.
Better-than-expected U.S. NFP data will spark a renewed U.S. dollar rally, because it would have suggested the Federal Reserve could continue to assess the economy and delay cutting interest rates.
Speaking of cutting interest rates, the People’s Bank of China (PBoC) announced plans to cut the Reserve Requirement Ratio (RRR) 50 basis points, effective September 16. Some qualified city commercial banks could see their RRR cut by 100 basis points.
FX markets didn’t react to the news as the cuts were anticipated.
The Canadian, Australian, and New Zealand dollars were the only currencies to open in Toronto with gains against the U.S. dollar, compared to Thursday’s close. The Swiss franc and British pound lost ground while the Japanese yen and Euro were unchanged. However, AUD/CAD and NZD/CAD have outperformed USD/CAD all week.
GBP/USD was the biggest loser overnight, weighed down by U.K. political drama. The currency pair dropped on news that the British high court ruled Prime Minister Johnson’s plan to prorogue parliament was legal.
Traders were also unhappy after Labour Party Leader Jeremy Corbyn said his party would not support a vote for an early election. GBP/USD dropped from $1.2342 to $1.2287 on the news.
EUR/USD was adrift in narrow range. Prices have declined steadily since the beginning of the month due to a concerns of less aggressive Fed rate cutting and anticipation of the European Central Bank (ECB) meeting next Thursday. The ECB telegraphed its intention to provide additional stimulus measures at the July meeting. Today, analysts expect a 10-20 basis point cut in the deposit rate, which is already negative.
Also, traders are looking ahead to Fed Chair Jerome Powell’s speech, scheduled for 12:30 p.m. EDT.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
