The Canadian dollar surged overnight, blasting through USD/CAD support between $1.3310- and $1.3330, for a 0.52% gain between Tuesday’s close and today’s open. And that wasn’t even the best performance. Those honours go to the Australian dollar, which gained 0.76%.
The Canadian dollar is merely a stowaway on the downhill U.S. dollar train. The greenback is being sold against all the major G-10 currencies, although further downside may be limited ahead of Friday’s U.S. employment report.
U.S. non-farm payrolls are expected to rise 1.6 million which at first blush sounds good. However, it will still leave 13 million jobs lost since March.
Canada is expected to gain 400,000 jobs leaving 1.762 million still unemployed since March. Neither report is conducive to supporting their currency.
U.S. government officials are busy trying to score election points at the expense of the unemployed.
The emergency CARES Act, created to help ease the burden of layoffs due to the pandemic, expired last Friday.
Congress has not approved a replacement deal. Markets are concerned that the lack of financial support to workers will derail the nascent US economic recovery, and are aggressively selling U.S. dollars.
The Canadian dollar is also benefiting from U.S. dollar selling, as it has boosted crude oil prices. West Texas Intermediate climbed to $42.37 from $41.50 overnight.
AUD/USD and NZD/USD were in demand, and the Canadian dollar went along for the ride. New Zealand reported a better than expected unemployment rate of 4.0% (forecast 4.2%) which underpinned NZD/USD. AUD/USD rallied on the strength of the Caixin China Services Purchasing Managers' Index report which showed the June data at 54.1, which is in expansion territory.
EUR/USD traded with a positive bias in a $1.1795-$1.1861 range and opened near the topo in Toronto. Euro-zone Retail Sales rose 5.7% m/m), following the 20.5% gain in May. Some analysts warn that the gains merely reflect pent-up demand due to the previous lockdowns.
GBP/USD is trading at the top of its 1.3059-1.3131 range as concerns about a second-wave of coronavirus infections are ignored. U.K. Services PMI data was 56.5 compared, to 47.1 in June.
U.S. Institute for Supply Management Non-manufacturing and ADP payrolls reports are due.
In Canada, the Merchandise Trade deficit is expected to widen -$0.680 billion to $0.9 billion.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
