The Canadian dollar started the week in a tight range against the U.S. dollar. Hurricane Harvey continues to wreak havoc in Texas and has hit the energy sector as it has forced refineries to close and has sent gasoline prices soaring. The U.S. dollar staged a comeback near the end of the Monday trading session and is looking ahead at the economic calendar release for further support. U.S. President Donald Trump also sent a tweet calling the NAFTA approach of Canada and Mexico as very difficult. Canadian Prime Minister Justin Trudeau spoke about Trump’s comments on Monday, saying there was nothing new and vowed to remain at the negotiating table to modernize the agreement.
The NAFTA pairs remain under pressure against the USD with the peso dropping 1.281 percent and the USD gaining 0.163 versus the CAD. The USD was left rudderless last week as the Fed Chief Janet Yellen chose to comment on regulation on what could be her last appearance as central bank chair at the Jackson Hole summit. U.S. employment data is the highlight this week, with a special emphasis on wage growth data to look for signs of inflation.
U.S. employment will guide markets as the ADP private payrolls report to be released on Wednesday, Aug. 30, at 8:15 a.m. starts the jobs data rollout. Analysts are forecasting a 186,000-job gain following the 178,000 jobs added in July. The biggest indicator will be released on Friday, Sept. 1, at 8:30 a.m., when the Bureau of Labor Statistics publishes the U.S. non-farm payrolls (NFP). The last two months have exceeded expectations and the market is anticipating a 180,000 addition of new positions in August. Inflation data in the job reports will be highlighted as the Fed appears to be slowing down on its tightening policy as wages and prices remain sluggish even as the number of jobs have been steady throughout the recovery.
The USD/CAD rose 0.163 percent on Monday. The currency pair is trading at 1.2502 after trading on a tight range at the beginning of the week. The loonie has been decoupled from oil prices as crude ended the week on a negative note even as Hurricane Harvey could disrupt Gulf energy producers. NAFTA talks have grabbed headlines as Trump has once again threatened to pull out of the trade deal. In an effort to have a more productive first round of negotiations, the three nations have signed non-disclosure agreements. The trade talks kick off on Sept. 1 in Mexico.
Canadian data will be sparse this week with the Raw Materials Price Index (RMPI) due on Tuesday at 8:30 a.m. EDT and the Current Account to be release on Wednesday at 8:30 a.m. EDT two of the highlights. The main indicator release this week for CAD traders will bet the monthly GDP data due on Thursday, Aug. 31 at 8:30 a.m. EDT. The Canadian GDP is expected to have slowed down after a strong first half of the year. The Canadian economic release will be sandwiched between the ADP private payrolls report on Wednesday and the U.S. non-farm payrolls (NFP) release on Friday.
U.S. energy prices dropped 2.261 percent in the last 24 hours. The price of West Texas Intermediate is trading at 46.64 after Hurricane Harvey has closed refineries and sent the price of gasoline higher, while crude is falling. Demand for U.S. crude will be lower as the open refineries will be backed up with oversupply while working overtime to take advantage of the rise of gasoline prices. Crude inventories will rise, which has affected the price of WTI, while Brent has fallen only by 0.827 percent in the same period.
Weekly inventory data for the U.S. due on Wednesday will give insights on the state of stocks last week, but can have an effect on this week’s prices as a larger buildup is now being priced in for next week’s report.
Gold prices rose on Monday by 1.473 percent. The yellow metal is trading at $1310.47 and continues near daily highs after the central bank summit in Jackson Hole brought little information on the paths of the U.S. Federal Reserve and the European Central Bank (ECB) leaving the USD weaker. The political turmoil in Washington will be compounded with the ongoing disaster relief in Texas due to Hurricane Harvey. The Trump administration has too many fronts open and the U.S. currency will be awaiting for employment data in search of positive news.
Gold is near 11-month highs after the comments of Fed Chair Janet Yellen and European Central Bank (ECB) President Mario Draghi focused on regulation and trade and sidestepped the hot topic of monetary policy. The Fed is now expected to slow down its rate hike path after a rate hike in December and the ECB has not committed to a hard timeline on reducing its QE program despite the pressure from Germany. The precious metal had been under pressure from a united front of central banks pushing for an end to low rates. Uncertainty in the U.S. political system has proven to support gold prices as geopolitical issues have escalated with North Korea and some barbs have been fired ahead of the NAFTA renegotiation.
Market events to watch this week:
Tuesday, Aug. 29
10 a.m. USD CB Consumer Confidence
Wednesday, Aug. 30
8:15 a.m. USD ADP Non-Farm Employment Change
8:30 a.m. USD Prelim GDP q/q
10:30 a.m. USD Crude Oil Inventories
9:30 p.m. AUD Private Capital Expenditure q/q
Thursday, Aug. 31
8:30 a.m. CAD GDP m/m
8:30 a.m. USD Unemployment Claims
9:45 p.m. CNY Caixin Manufacturing PMI
Friday, Sept.1
4:30 a.m. GBP Manufacturing PMI
8:30 a.m. USD Average Hourly Earnings m/m
8:30 a.m. USD Non-Farm Employment Change
10 a.m. USD ISM Manufacturing PMI
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar
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