- US regional bank woes, dovish Fed, hawkish ECB, sink greenback.
- Nonfarm payrolls expected to rise just 179,000.
- US dollar opens mixed but, Commodity bloc outperforms.
USDCAD snapshot: open 1.3505-09, overnight range 1.3488-1.3540, close 1.3538, WTI $69.72, Gold $2037.65
The Canadian dollar staged an impressive rally yesterday, then extended gains overnight.
Bank of Canada Governor Tiff Macklem may have contributed to the Loonies' performance. He spoke to the Toronto Board of Trade yesterday and let the rate-hike genie out of the bottle again.
Mr Macklem and his colleagues may be having second thoughts about halting rate hikes two months ago. They left rates unchanged for the second consecutive meeting on April 12. They expressed concern that the BoC’s 2.0% inflation target may be illusive.
He expanded on that subject yesterday. He said “for inflation to fall to 2.0% there are three things need to happen: 1) the labour market needs to rebalance, and wage growth needs to moderate. 2) Businesses need to slow the pace and size of their price increases. 3) Inflation expectations need to come down.”
He also said if they see signs inflation is getting stuck above the target, “we are prepared to raise rates again.”
Those somewhat hawkish remarks fly in the face of analysts' dovish Fed outlook.
The Canadian dollar also rallied after the ECB raised rates 25 bps and left the door open to two or more increases down the road.
The latest regional bank woes exacerbated US dollar selling pressures and the Canadian dollar benefitted.
Today’s US and Canadian employment reports are due and as usual the Canadian data will be overshadowed by the US results.
Canada is expected to have gained 20,000 jobs in April, but the results will be overshadowed by the US NFP data.
The US nonfarm payrolls report is expected to show a decent 179,00 gain in new jobs which is 57,000 less than in March. If so, dollar bears will be happy as it suggests the tight labour market is loosening, which supports the Fed rate cut argument.
EURUSD traded in a 1.10.08-1.1047 range overnight with weaker than expected Euro zone retail sales acting as a drag gains.
GBPUSD rallied from 1.2573 to 1.2633 due to broad US dollar weakness and anticipation of a hawkish 25 bps rate hike next week.
USDJPY traded with a negative bias in a 133.90-134.31 range with prices weighed down by soft US Treasury yields.
AUDUSD rose from 0.6694 to 0.6743, buoyed by higher commodity prices and RBA hawkish comments.