- BoC Business Outlook Survey due
- US closed for Martin Luther King day
- US dollar under pressure but supported by profit-taking
USDCAD snapshot: open 1.3384-88, overnight range 1.3355-1.3416, close 1.3395, WTI $79.45, Gold $1915.81
The Canadian dollar continues to consolidate its gains since the twin Canadian and US employment reports. The surprisingly strong domestic data suggested that the Bank of Canada may be a tad more hawkish than previously expected. The US nonfarm payrolls results showed that the labour market was resilient, and wages remained elevated.
The Canadian dollar remains underpinned by market expectations that the Fed will need to cut interest rates before the end of the year which contradicts the messaging from various Fed officials. Inflation may be moving in the right direction but at 6.5% y/y remains far above the Fed’s 2.0% target.
The Bank of Canada’s quarterly Business Outlook Survey usually provides some clues to the tone of the following BoC monetary policy meeting. That may not be the case with today’s report. The BOS survey was done between the middle of November and early December, and the employment reports, the US inflation data, and Tuesday’s Canadian CPI report, suggest the BOS results are too stale to be meaningful.
The ongoing discussion about the US debt ceiling is seen as a distraction, as both political parties acknowledge that shutting down the government is not a popular move among voters.
The EURUSD dropped from 1.0873 in Asia to 1.0803 in Europe before climbing to 1.0827 in early trading in Toronto. German wholesale prices decreased by 1.6% in December. The intraday EURUSD technicals are bullish above 1.0750, looking for further gains to 1.0950. A break below 1.0750 suggests a drop to 1.0630.
GBPUSD traded in a range of 1.2173-1.2288, peaking in Asia and bottoming out in Europe. GBPUSD is supported by Friday's better-than-expected GDP data and reports of a thaw in EU/UK Brexit tensions over Northern Ireland. GBPUSD technicals are bullish above 1.2110.
USDJPY dropped to 127.23 in early Asia then rebounded to 128.85 on profit-taking ahead of the Bank of Japan meeting. Traders expect another hawkish policy tweak.
AUDUSD traded in a range of 0.6942-0.7018, with price action driven by broad US dollar moves and profit taking.
There are no major US economic reports scheduled for today.
