- Widening CAD/US interest rate spreads weigh on Loonie.
- Oil prices rise on renewed Iran/Israel hostilities.
- US dollar giving back European gains in early NY trading.
USDCAD open: 1.3947, overnight range 1.3936-1.3954, close 1.3939, WTI 94.77, Gold 4,292.62
The Canadian dollar got spanked following the stronger than expected US jobs report on Friday and it has yet to recover. Traders ignored the Canadian employment data which was also surprisingly strong, because the domestic results will have no bearing on Wednesday’s BoC rate decision while the US numbers suggest a hawkish bias to the Fed statement.
WTI oil prices rose to 95.38 from 9153 after Iran and Israel renewed hostilities. Opec announced another 188,000-production increase beginning July but the news was ignored
Friday's blockbuster Non-farm Payrolls print of 172,000 new jobs has flipped the rate narrative on its head. Rather than debating when the Fed cuts, markets are now pricing in the possibility of a hike, with FedWatch tool odds for a rate increase before year-end sitting at 67%. Those probabilities will move sharply higher if this week's US inflation data comes in above consensus.
Risk assets took the news badly. The equity selloff that began Friday extended into the overnight session as investors and the tech sector stepped back from their recent infatuation. Treasury yields climbed, crude pushed higher, and gold shed 0.72%, bringing its one-month loss to 8.47%.
The week opened on a sour note across Asian bourses. Tokyo's Topix dropped 2.45% and the Hang Seng gave back 1.22%, while the Australian ASX 200 was sidelined by the King's Birthday holiday.
As of 7:30 am, European bourses are mixed. The German DAX has lost 0.29%, the French CAC 40 is flat and the FTSE 100 is up 0.27%. S&P 500 futures are up 0.64%, the 10-year Treasury yield stands is 4.543%, and the DXY is 99.93.
EURUSD chopped in a 1.1500-1.1540 range overnight, after cratering on Friday after the US jobs data. The ECB is expected to bump rates on Thursday, though the fundamental backdrop is softening. German Factory Orders contracted 3.8% in April after a 4.5% gain in March.
GBPUSD consolidated in a 1.3306-1.3350 range, due divergent BoE and Fed interest rate outlooks. GBPUSD gains were limited following comments by BoE policymaker Alan Taylor, who said he sees no case for pushing UK rates higher.
USDJPY clawed back the entirety of Friday's post-NFP decline to trade in a 159.85-160.35 band, lifted by the rise in US Treasury yields and firmer oil prices. Traders do not appear to be overly concerned that the BoJ could raise rates next week.
AUDUSD held a 0.7024-0.7065 band as the currency consolidated last Friday's losses in subdued conditions. Turnover was light with Australian markets closed for the long weekend
There US and Canadian data calendars are empty.
