Both Canada and the U.S. release their employment numbers tomorrow, neither is expecting changes in their unemployment rates, the U.S. 3.8%, Canada 5.8%. Analysts will be looking for the actual job gains to see how these North American economies are doing. In the U.S., expectations are for a range between 144,000-212,000 new jobs, while Canada is a gain of 18,000 new jobs. No real change in the range today, 1.3110-1.3140.
The Federal Reserve release the minutes of its last meeting today, since the Fed gives out the details at the end of the actual meeting, there should be no surprises.
Oil prices are down slightly, Saudi Arabia announced that it has dropped prices and will increase production in order to offset any disruptions and to appease Trump’s comments that OPEC should do something to lower prices. The irony is that, the more he complains, the higher prices have got.
USDCAD 1.3111, 1.3100, 1.3080 1.3161, 1.3178, 1.3190
USD-CAD has settled in the mid 1.31s after correcting 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 ran into a wall of selling above 1.1700, managing to post a seven-session high of 1.1720 before correcting to levels around 1.1680. The pair still remained up by 0.2% on the day, and by 1% over the last week. EUR-JPY and other euro crosses are also buoyant. A run of good data out of the Eurozone has underpinned the common currency. German manufacturing orders, released earlier, were much stronger than expected with growth of 2.6% m/m. Yesterday saw unexpected upward revisions to final Eurozone June services and composite PMIs. Last week’s agreement among EU members on immigration (to shore up external borders and create screening centres for migrants), along with Merkel’s compromise on border controls, to preserve the governing coalition in Germany, have 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, 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. A major “known unknown” is to how deep and how prolonged the Trump-led trade war with major economies will be, and what economic and currency market fallout this will cause, and this is keeping directional commitment at bay for now.