The Canadian dollar should have soared Friday, after Statistics Canada reported 90,200 new jobs were created in August. It didn’t happen.
The Canadian data was greatly overshadowed by higher-than-expected U.S. Producer Price Index data. The report showed PPI rose a record 8.3% y/y in July.
The results underpinned Philadelphia Fed President Patrick Harker’s call for tapering to start "sooner rather than later."
The U.S. data, concerns about the rising COVID-19 Delta-variant cases and sliding equity markets fueled U.S. dollar demand across the board. The Canadian dollar was collateral damage.
The U.S. dollar extends gains overnight, mainly because of a lack of economic data although ongoing Chinese government actions didn’t help sentiment.
Chinese authorities continued with their crackdown on tech stocks with officials planning to break up Alipay and demanding improved working conditions for workers. Taiwan is also on the radar screen. China Global Times took a shot at the U.S. and told it to "stop exerting extreme pressure on China and to refrain from provocations at China’s doorstep."
They were also unhappy with U.S. Navy ships transiting the Taiwan Strait and a US proposal to re-name the U.S. office in Taiwan.
Oil prices remain elevated despite increased production by the Organization of the Petroleum Exporting Countries (OPEC). Analysts at Bank of American suggested WTI oil could hit $100.00/barrel if weather turns cold earlier than usual.
The firmer oil prices combined with the domestic employment report, and bearish USD/CAD technicals suggest the Canadian dollar should trade higher.
EUR/USD is under pressure again after failing to sustain gains above $1.1900 and then plunging below $1.1800. The European Central Bank announced plans to taper, but they were wrapped in a very dovish package that leaves EUR/USD exposed to a widening U.S. and ECB interest rate differentials.
The drop below $1.1800 suggests further weakness to $1.1700.
GBP/USD is outperforming against the single currency due to rising expectations that the Bank of England will raise interest rates well ahead of the ECB. However, gains were tapered because of recent Chinese actions which may turn global risk sentiment negative and spark a flight to safe-haven U.S. dollars.
USD/JPY is hovering around the 110.00 area. Steady U.S. 10-year Treasury yields support prices, but gains are capped by lingering risk uncertainty.
The U.S. and Canadian economic calendars are empty today.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
