The Canadian dollar rally fizzled on Friday. The currency was unable to take advantage of a far-better-than-expected domestic employment report in part because even better U.S. non-farm payrolls data overshadowed the domestic results. Canada added a record 289,600 jobs in May, which looks terrific, but the gain is a mere drop in the bucket compared to the three million jobs that disappeared in March and April.
The U.S. added 2.5 million jobs in May, which was much better than the consensus forecast for a loss of eight million. The results were impressive, but the gains have a long way to go to recover the 22 million jobs that disappeared in the previous two months. However, the U.S. Bureau of Labor Statistics admitted a "miscalculation error" which led to the unemployment rate of 13.3% being understated by 3.0%.
Nevertheless, the results gave hope to forecasts for a quick economic rebound.
Wall Street thought so. The Nasdaq climbed to a new record intraday high on Friday.
Asia FX markets opened on a subdued note because Australia was closed for a holiday. China trade data gave markets some hope as May exports fell less than forecast.
AUD/USD bounced inside a $0.6963-0.7002 range, consolidating last weeks gains. NZD/USD traded similarly.
USD/JPY was unable to hang on to Friday’s post-NFP gains as prices drifted gently lower overnight. Japan Q1 GDP fell 2.2% y/y, a tick lower than forecast. The small dip undermined prices in U.S. Treasury yields.
The Canadian dollar failed to derive much support following the Organization of the Petroleum Exporting Countries and OPEC + friends’ announcement that they agreed to extend the 9.7 million barrels per day production cuts until August 1. Oil prices inched higher but not the Canadian dollar. Canadian crude is trading at a $9.62 discount to WTI, and even after the post-OPEC gains, WTI is well below February levels.
EUR/USD traded in a $1.1269-$1.1319 range, rallying in Asia and retreating in Europe after weak German Industrial Production. The price action is likely because of position adjusting ahead of Wednesday’s Federal Open Market Committee meeting. EUR/USD continues to be supported by the slew of stimulus measures announced by the European Central Bank, Germany, and EU.
The U.S. and Canadian data calendars are empty, and Wednesday’s FOMC meeting provides traders with an excuse to remain on the sidelines.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
