Initially the U.S. employment data reinforced that the Federal Reserve will definitely have room for an extra rate hike, however, it soon became clear that oil traders are bracing for President Trump to re-impose U.S. sanctions against Iran, which in turn could cut supplies from that country. The USDCAD was 1.2900 and as the oil news made its way through the markets, it came back to its closing levels.
If one was to compare USDCAD oil prices today versus 2008 when oil was over $100 USD, the USDCAD was 0.95, which meant Canada received $95 CAD a barrel, today oil is $69 USD which is $89 CAD a barrel.
USDCAD 1.2832, 1.2815, 1.2810 1.2875, 1.2881, 1.2896
USD-CAD has remained buoyant, posting a one-month high of 1.2914 earlier in the week before retreating to the mid-to-lower 1.2800s. The move extended a rebound from mid-April two-month low at 1.2527. A correction in oil prices, which have descended back under $68.0 in the WTI benchmark market after making a 40-month high at $69.56, along with a generally firmer bias in the U.S. dollar and associated rise in U.S. Treasury yields, have driven the rebound in USD-CAD. The Canadian dollar had already been coming off the boil in the wake of the April BoC policy meeting, as the statement indicated that the central bank would maintain its cautious stance on future policy changes, which remain data dependent. The latest price action in USD-CAD has negated the downside trend that had been in play over the prior three weeks, from levels near 1.3100.
EUR-USD ebbed back into the mid 1.1900s and toward the four-month low that was seen on Wednesday, at 1.1937, reflecting a rebound in the dollar following the correction that was seen in the wake of Wednesday’s less-hawkish than expected Fed statement. We don’t think the statement will materially affect expectations for the Fed to high in June and beyond, and expect the dollar to remain a buy-on-dips trade; indeed, expectations for a strong April U.S. payrolls report today, coupled with lower levels, elicited some fresh demand for the greenback. On the Eurozone side of the coin, retail sales data for March disappointed at 0.1% m/m growth, which was blamed on the “Beast from the East” snow storm, while the final April Eurozone composite PMI figure — a post-bad-weather snapshot — was unexpectedly revised lower, to 55.1, albeit fractionally from 55.2, paced by a sharp slowing in the German services PMI to 53.0 from 54.1. The timely survey data show that a cooling in what has been robust economic growth is afoot, which has taken the edge out expectations for the ECB to commence a de-stimulation of monetary policy later in the year. Regarding the U.S. payrolls, we expect a solid 210k headline rise, noting upside risks following tight initial claims data and remarkable strength in consumer confidence and vehicle sales data. We advise EUR-USD trend following. Resistance is at 1.2011-12.