- Markets cautious due to US government shutdown risk
- US employment picture in focus all week.
- US dollar opens slightly lower after subdued overnight session
USDCAD open 1.3922, overnight range 1.3916-1.3948, close, 1.3942, WTI 64.64, Gold 3808.05
The Canadian dollar traded quietly as it consolidates last week’s losses. Friday’s slightly stronger-than-expected Canadian July GDP print adding modest support. Although the data suggests that Canada may sidestep an official recession for now, growth of just 0.2% m/m argues that the economy is hardly growing.
WTI is drifting near the lower end of its 64.36-65.40 band as renewed Iranian supply and talk of another OPEC production hike in November weigh on prices.
The Canadian calendar is empty.
The US budget standoff comes to a head on Wednesday if Congress fails to back Trump’s spending plan. Republicans hold 53 Senate seats but need at least 60 to pass a major bill. Trump has warned of permanent layoffs for “thousands” of federal workers if Democrats refuse his demands. FX traders took the headlines in stride, but gold (XAUUSD) spiked to 3819.80 from 3760.24.
The broader focus this week is on the job market with Powell’s attention fixed on labor conditions. Friday’s nonfarm payrolls report is forecast to show just 39,000 new jobs, while earlier releases include ADP employment, Challenger job cuts, and weekly claims. Month- and quarter-end flows on Tuesday are another hurdle for traders.
Asian equity indexes closed mostly higher. Japan’s TOPIX slid 1.74% ahead of the LDP election next weekend, while Australia’s ASX 200 climbed 0.85% and Hong Kong’s Hang Seng advanced 1.89%.
As of 7:30 am EDT, European equities were flat to modestly higher, with the DAX and CAC-40 little changed and the FTSE 100 up 0.55%. S&P 500 futures gained 0.46%. The US dollar index is at 98.03, gold trades at 3825.06, and the 10-year US Treasury yield is 4.152%.
EURUSD traded in a 1.1700-1.1734 band with little reaction to the latest confidence indicators. Economic sentiment ticked up to 95.5 from 95.3 while industrial and services confidence barely changed, leaving traders cautious due to political uncertainty in France.
GBPUSD moved from 1.3396 to 1.3451 as traders tracked the Labour Party conference and UK budget speculation. Worries that additional government spending could roil the gilt market capped the upside.
USDJPY dropped from 149.55 to 148.47, partly on safe haven flows tied to US budget risks and last week’s rise in Treasury yields. Political uncertainty ahead of the LDP elections this weekend is limiting deeper losses.
AUDUSD climbed from 0.6546 to 0.6574, supported by expectations that the Fed will cut rates further while the RBA is expected to hold steady at 3.60% at tomorrow’s meeting.
