Canadian dollar trading is choppy and directionless inside a USD/CAD uptrend channel that has been intact since June 4. The Canadian dollar dropped as West Texas Intermediate (WTI) oil prices declined.
Yesterday, the Energy Information Administration reported U.S. crude inventories rose 3.62 million barrels in the week ending July 30. That news and increased production by the Organization of the Petroleum Exporting Countries fueled fears that supply would outstrip demand, especially if global economic growth slows.
Overnight, Canadian dollar traders seemingly ignored oil price movements and tracked commodity currency price action. AUD/USD and NZD/USD eked out gains, and the Canadian dollar climbed as well.
However, the price action is just noise, as traders await U.S. and Canadian employment data. U.S. nonfarm payrolls are expected to rise 870,000, while Canada jobs should increase by 177,000.
The U.S. employment data has an increased focus in light of recent comments from Federal Reserve officials. Fed Vice-Chair Richard Clarida surprised some analysts yesterday when he predicted that the necessary conditions needed to raise interest rates might be met by the end of 2022.
Dallas Fed President Richard Kaplan was more specific. He said the Fed should begin tapering if the July and August employment reports are as robust as the June data.
Both those comments gave the greenback a boost yesterday, and it consolidated those gains overnight.
Asia traders were extra cautious due to new restrictions following rising coronavirus delta variant cases.
The European session was uneventful despite the Bank of England (BoE) monetary policy meeting. The BoE left monetary policy unchanged. Interest rates stayed at 0.1%, and Quantitative Easing is unchanged, although the vote was vote not unanimous.
The statement noted, "U.K. (Gross Domestic Product) is projected to recover further over the remainder of the year, reaching its pre-pandemic level in 2021 Q4, with demand growth boosted by a waning impact from COVID.”
The statement also warned of rising inflation, saying, "(Consumer Price Index) inflation is projected to rise temporarily in the near term, to 4% in 2021 Q4."
The BoE meeting had little impact on GBP/USD trading.
FX traders expect another quiet session today. Canadian Trade and U.S. weekly jobless claims will not spark much interest ahead of Friday’s Canadian and U.S. employment reports.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
