January 10, 2025
- Robust NFP jobs data ignites US dollar demand
- Fed officials preaching patience.
- USD rallies post-NFP
FX at a Glance
USDCAD open 1.4407, overnight range 1.4393-1.4437, close 1.4396
USDCAD rallied on the heels of the US and Canadian employment reports. Both were stronger than expected but the American data counts more.
Canada’s Labour Force Survey (LFS) showed a gain of 90,900 jobs in December well above the 25,000 that was expected. Even better, the unemployment rate fell to 6.7% from 6.8%, rather than ticking higher as forecast. Once again, the details were weak. The job gains were impressive but that is only because government jobs are increasing at 2.6 times the pace of the private sector in the past two months. If this keeps up, soon everyone will work for the Fed or province.
A flock of “I-wanna-be-important” Liberals are vying to replace Trudeau, which will happen on March 9. Among the contenders is former Bank of England Governor and carbon tax zealot Mark Carney. Chrystia Freeland (Trudeau’s Brutus) is also hoping to lead the party, which will be lucky to obtain official party status if either of them wins.
WTI oil prices are higher, rising from 74.03 to 76.71 than rallied to 77.08, post NFP. Prices are underpinned by falling US crude stocks and the polar vortex impacting most northern states.
USDCAD Technicals
The intraday USDCAD bias is bullish while trading above 1.4380, looking for a break above 1.4450 to extend gains to 1.4500. A move below 1.4380 targets support at 1.4340.
The October uptrend line is intact above 1.4270 and the Stochastic RSI’s indicate building momentum for further gains
For today, USDCAD support is 1.4380 and 1.4340. Resistance is 1.4450 and 1.4500
Today’s Range: 1.4380-1.4480
Chart: USDCAD daily
The US Economy Chugs Along
“Neither polar vortex nor wildfires nor gloom of night stays American job creation.”
Santa delivered another blow-out US employment report which was just unwrapped today. NFP rose by 256,000 jobs, easily topping the forecast of 160,000 new jobs and the unemployment rate dipped to 4..1% from 4.2%. Today’s results provided additional rationale for FOMC caution.
The 10-year Treasury popped to 4.797% from 4.70% and the US dollar index rallied to 109.83 from a pre-NFP level of 108.97. S&P 500 futures extended overnight losses and are down 0.89%.
Fed-speak Reiterates Need for Caution
A gaggle of Fed officials chirped about the need for policymakers to remain cautious. Philadelphia Fed President Patrick Harker used a path as a metaphor. He said, “Looking at everything before me now, I am not about to walk off this path or turn around. The exact speed I continue to go along this path will be fully dependent upon the incoming data.”
Kansas Fed President Jeff Schmid concurred, saying, “I am in favor of adjusting policy gradually going forward and only in response to a sustained change in the tone of the data.”
Governor Michelle Bowman was even more cautious. She said she thought the December cut was the “final step,” saying, “We should also refrain from prejudging the incoming administration’s future policies.”
EURUSD
NY open 1.0303, overnight range 1.0281-1.0312
EURUSD spun its wheels overnight then dropped to 1.0215 post-NFP. Today’s very chunky option expiries suggest a lot of price volatility around 10:00 am ET. Reportedly, there are at least $2.5 billion of strikes between 1.0200-1.0230 maturing with a further $3.6 billion in the 1.0275-1.033 area.
GBPUSD
NY open 1.2294, overnight range 1.2267-1.2311
GBPUSD dropped to 1.2193 in the wake of the US data but bounced back to 1.2232. The currency pair is struggling to rally amidst UK budget and debt concerns. Bond traders are telling Chancellor Reeves that she needs to consider spending cuts due to the steep rise in borrowing costs which have fueled the GBPUSD sell-off.
In other news, former UK Prime Minister Liz Truss is fuming because current PM Keir Starmer keeps reminding Brits that she “crashed the economy.” She did, but she is still threatening to sue him for defamation.
USDJPY
NY open 158.08, overnight range 157.62-158.45
USDJPY popped to 158.88 with the post NFP jump in the US 10-year Treasury yield to 4.797%. Prices have retreated somewhat with gains capped by renewed speculation that the BoJ will raise rates this month and intervention fears.
AUDUSD
NY open 0.6187, overnight range 0.6181-0.6207
AUDUSD dropped to 0.6139 after the US data then rallied back to 0.6153. AUDUSD has a negative bias due to a mix of domestic and foreign issues. The prospect that the RBA cuts rates in February combined with ongoing Chinese issues is weighing on prices.
NZDUSD
NY open 0.5579, overnight range 0.5575-0.5603
NZDUSD is mirroring Aussie moves. It dropped to 0.5543 after the NFP report but upside is limited due to bearish sentiment. The negativity stems from China’s decision to halt yuan bond purchases adding to its woes in addition to expected RBNZ easing in February.
USDMXN
NY open 20.5127, overnight range 20.4807-20.5648
USDMXN blasted above its overnight peak after the US data and hit 20.7041 before dropping to 20.6530. USDMXN is bid because of yesterday’s headline inflation data. CPI rose just 4.21% y/y, compared to 4.55% in November. In addition, the minutes from the Banxico monetary policy meeting on December 19 revealed that policy makers may step up the pace and size of interest rate cuts.
FX high, low, open (as of 6:00 am ET)
China Snapshot
PBoC Fix: 7.1891 vs exp. 7.3138 (prev. 7.1886)
Shanghai Shenzhen CSI 300 fell 1.25% to 3732.48
PBoC to halt buying of Chinese bonds because of “excess demand” but buying will resume at an appropriate time. Bloomberg wrote that the yield on the 10-year Chinese treasury bond touched 1.6% recently widening the gap between the US 10-year to around 300 bps. Falling Chinese bond yields are putting negative pressure on the currency.
Chart: USDCNY and USDCNH
Sources: Yahoo Finance, Oanda, Investing.com, Google Finance
