– Weak Canadian growth weighs on Loonie
– Nonfarm payrolls likely a non-event due to upcoming US election
– US dollar opens drifts higher in dull overnight session.
USDCAD: open 1.3930, overnight range 1.3925-1.3943, close 1.3935, WTI $71.23, Gold, $2750.99
The Canadian dollar is on the defensive after yesterday’s GDP report highlighted the economy’s weak performance as it is in stark contrast to the robust growth in the U.S. The domestic economy grew just 0.1% in August and July’s result was downgraded to 0.1% m/m from 0.2%. Meanwhile, in America, the US economy is chugging along at a 2.8% y/y in Q3 while Canada will be lucky to see 1.0% growth. If the weakness persist, the Bank of Canada may cut interest rates by another 50 bps on December 11.
A 6.3% surge in WTI oil prices since Tuesday has not had any noticeable impact on the Canadian dollar.
The importance of today’s US non-farm payrolls report, expected to show just 113,000 new jobs compared to 254,000 last month, has been eclipsed by two hurricanes and the strike at Boeing. The soft headline number may suggest a more resilient employment market. Nevertheless, for today, only one job matters: the winner of the presidential election. ISM manufacturing data will have minimal impact ahead of Tuesday’s vote.
EURUSD slipped back, erasing most of Thursday’s gains as it traded within a 1.0854-1.0889 range. Support for EURUSD comes from expectations of a more hawkish tone in the ECB’s November 14 policy meeting, after recent higher inflation figures. Many Eurozone markets remain closed today for All Saints Day.
GBPUSD bounced in 1.2885-1.2919 range, consolidating recent budget-driven losses. The 10-year Gilt yields have stabilized at 4.473%, below the 4.53% peak yet still well above pre-budget levels of 4.21%.
USDJPY ticked higher within a 151.79-152.85 range, boosted by strong US 10-year Treasury yields, which overshadowed the latest BoJ policy meeting results and Governor Kazuo Ueda’s recent comments minimizing risks of further tightening.
AUDUSD slid within a 0.6556-0.6584 range, pressured by overall US dollar strength and cautious sentiment ahead of the US election and the upcoming RBA policy decision on Monday. Q3 PPI data, which edged down to 0.9% from 1.0%, and an upbeat Chinese PMI report were largely ignored by traders.
