U.S. markets are closed, and trading will likely be very light today and tomorrow, Canada and the U.S. both have employment numbers on Friday. Canada’s employment rate is expected to remain the same with a small gain in jobs.
Oil prices remain buoyant, still over the $74 USDS a barrel for West Texas Intermediate. Meanwhile Iran has announced that it will exchange oil for hard assets, such agricultural products or medical equipment, it had resorted to using these methods the last time sanctions were put in place.
USDCAD 1.3120, 1.3101, 1.3075 1.3165, 1.3185, 1.3200
USD-CAD posted a three-week low of 1.3111, extending from a one-year high that was pegged at 1.3387 last Wednesday. Expectations for the BoC to hike rates next week along with the big surge in oil prices have buoyed-up the Canadian dollar. USD-CAD has resistance 1.3210-11. Upcoming Canadian data include the June employment report (Friday), which we expect to rise 25.0k after the 7.5k dip in May and 1.1k dip in April. The unemployment rate is expected to hold at a 40-year low 5.8%. Trade data (also due Friday) is expected to show the deficit widen to -C$2.2 bln in May from -C$1.9 bln in April. Data in line with our estimates would support our expectation that the BoC will lift rates 25 bp to 1.50% at the July-11 announcement.
EUR-USD has steadied after tumbling about 40 pips earlier, leaving a low at 1.1636. A two-day high was earlier left at 1.1681. Unexpected upward revisions to final Eurozone June services and composite PMIs helped buoy the common currency, which remains over a big figure from last week’s lows, having been underpinned by last week’s agreement among EU members on immigration (to shore up external borders and create screening centres for migrants). This, along with Merkel’s compromise on border controls, which saved the governing coalition, has reduced the existential-threat discount that had been built into the euro, on the view that this should placate the Italian populist government and broader Eurosceptic, populist movements across the region. Bigger picture, the EUR-USD remains in broadly consolidative phase after a downtrend from mid-April levels above 1.2400. The range over this phase has been 1.1508 to 1.1851. More of the same looks likely for now.