Baystreet.ca - - Traders looking ahead to Friday’s US nonfarm payrolls report.
- Bank of Canada expected to cut rates by 25 bps tomorrow.
- US dollar is bid to start the week.
USDCAD: open 1.3535, overnight range 1.3476-1.3548, close1.3496, WTI $72.64, Gold, $2500.98
The Canadian dollar is on the defensive to start the month. It is a short, data and event-rich week which includes the Bank of Canada (BoC) monetary policy meeting tomorrow and the US employment report on Friday. Of the two, the US employment data will play a bigger role in USDCAD direction than will the BoC.
The BoC is universally expected to announce another 25 bp rate cut to 4.25% with another 25 bp cut expected in October. Friday’s Canadian GDP did not do anything to change the outlook. The headline rise of 2.1% y/y was far stronger than expected (forecast 1.6%) but the details were rather soft.
Today, the spotlight in the US is on the ISM Manufacturing and ISM Employment Index, which could shake up markets as traders focus on jobs data. Inflation? That's old news.
EURUSD bounced in a 1.1034-1.1079 range since Monday.
GBPUSD traded negatively in a 1.3109-1.3151 range. Yesterday’s UK Manufacturing PMI matched expectations at 52.5, and traders are now waiting for the UK Services PMI data tomorrow, along with Friday’s US employment report.
USDJPY churned inside a 145.62-147.21 range before opening at 145.95 in New York. Traders overlooked the weak Manufacturing PMI for August (actual 49.8 vs. forecast 49.5, unchanged from July) and focused on comments from BoJ Governor Kazuo Ueda. Mr Ueda warned of further rate hikes if the economy and inflation align with expectations.
AUDUSD traded in a 0.6730-0.6798 band between Monday and Tuesday, and is hovering just above the low in New York trading..Gains were limited by weaker-than-expected August Manufacturing PMI data (actual 48.5 vs. forecast 48.7, previous 48.7), soft Chinese economic data and declining iron ore prices.