- US NFP expected to rise 300,000, Unemployment rate unchanged at 3.5%
- European equities grind higher Wall Street Futures are flat
- US dollar stays bid in anticipation of robust NFP numbers -CAD outperforms
USDCAD Snapshot open 1.3144-48, overnight range 1.3136-1.3168, close 1.3154, WTI oil $88.49, Gold $1707.32
The Canadian dollar consolidated yesterday’s losses in a quiet overnight session. FX traders are biding their time until the US nonfarm payrolls report is released this morning at 8:30 am ET.
Analysts predict that the US added 300,000 jobs in August and that the unemployment rate stayed at 3.5%. They expect today’s results to be another in a string of robust economic reports recently which confirm the resilience of the US economy.
If NFP exceeds the forecast, the US dollar will rally, stocks will fall, and Treasury yields should remain elevated in the 3.28% area. The reaction will probably be similar if the job gains are lower than expected due to Fed officials' recent spate of hawkish rhetoric.
Fed Chair Powell reminded markets of his commitment to return inflation to the Fed’s 2.0% target last Friday, and since then, many other Fed policymakers have offered similar views.
Cleveland Fed President Loretta Mester predicted US rates will be above 4.0% for all of 2023, putting a serious dent in the plans of those expecting a pivot.
The outlook for higher US interest rates is wreaking havoc in the commodity market. Since Powell's Jackson Hole speech, West Texas Intermediate oil prices have shed 11.4%, from peak to trough. Gold prices fell from $1755.00 to $1693.00 in the same time frame.
EURUSD traded in a 0.9944-1.0017 range, peaking in Europe and drifting down to 0.9998 in early NY. The outlook for the single currency is unchanged and bearish. It is supported by expectations for a 75 bp rate hike next Thursday, but gains are limited due to recession risks, the energy crisis, and the Russia/Ukraine war.
GBPUSD traded in a 1.1534-1.1581 range. The UK will have a new Prime Minister just after noon today, with the Secretary of State for Foreign, Commonwealth and Development Affairs Liz Truss expected to win decisively.
USDJPY traded in a 139.88-140.48 range due to the rise in the 10-year Treasury yield to 3.26% from 3.19% yesterday.
AUDUSD drifted in a 0.6781-0.6812 range, partly due to lower commodity prices.
The Canadian economic data calendar is empty.
