CAD
Coming a week later than the counterpart US publication, this afternoon’s jobs report should be the focus for loonie traders. Markets are looking for a 27.0k net change in employment, up fractionally from 22.1k in August, while the unemployment rate is expected to rise to 6.7% in September, up from 6.6% previously. In our view, the odds are skewed in favour of disappointment on both counts. As we see it, the economy remains soft, which should be continuing to weigh on job creation. In any case, even an on-expectations set of readings should contrast unfavourably with data south of the border, supporting a further divergence in rate-cut expectations between the BoC and the Fed. Moreover, we also expect the BoC business outlook survey, released at 15:30 BST, to paint a grim forward-looking picture of the Canadian economy as well. If we are right, this sets up USDCAD for a leg higher today, which could see the pair consolidating above 1.38.
USD
Despite yesterday’s core CPI landing at 0.3% MoM, beating consensus expectations that had looked for a 0.2% print, the dollar nevertheless ended the day broadly unchanged. In part, this reflected the composition of Thursday’s upside surprise, with airfares and car insurance notable upside contributors. But crucially, much of the strength seen across the CPI basket is unlikely to translate into the Fed’s preferred PCE reading given the differing compositions, mitigating the impact for both policymakers and markets. The other main factor hampering the greenback on Thursday was an initial jobless claims print, which at 258k also exceeded expectations for a 230k reading by some distance. To us, this was hardly surprising, given the impact of Hurricane Helene. But for markets that continue to harbour lingering concerns over the state of the US labour market, it was still sufficient to give pause for thought, containing any dollar upside. Today, PPI readings are the major US data event of note. If these match expectations, this should ensure a 0.2% core PCE reading for September, an outcome that we expect will keep the dollar treading water into the weekend.
EUR
A very light data calendar should see euro traders’ attention focused on next Thursday’s ECB meeting ahead of the weekend. A 25bp rate cut is expected by markets and is our call for the meeting too. That said, we still see scope for an acceleration in the easing pace priced by markets past the end of this year, especially if President Lagarde offers up some dovish signals next week. Given this, we see downside risks for EURUSD in the short term, with the pair currently trading in the 1.09-1.10 range. A break sub-1.09 looks a distinct possibility, albeit one that might need some guidance from the ECB Governing Council before it is realised.
GBP
This morning’s GDP reading matched expectations, showing the UK economy grew by 0.2% in August. That said, downwards revisions indicating the economy also flatlined through June and July did take the shine off what was an otherwise constructive set of growth data. As noted previously, the strength seen across PMI readings in recent months gives us some confidence that growth momentum should be sustained into the back end of Q3. If so, this should see the UK remain amongst the fastest-growing major economies this year, supporting longer-run sterling appreciation. For now, though, sterling has taken this morning’s data in stride, trading broadly unchanged post-release.
This content was originally published by our partners at Monex Canada.