June 7, 2024
- Nonfarm payrolls rise 272,000 (forecast 185,000)
- Canada gains 26,700 jobs
- US dollar surges following hotter than expected NFP.
FX at a Glance
Source: IFXA/RP
USDCAD open 1.3683, overnight range 1.3664-1.3737, close 1.3671
USDCAD surged to 1.3737 from 1.3690 after tame Canadian employment data and a hotter than expected US nonfarm payrolls report. For those keeping score, Canada gained 26,700 new jobs but they were all part-time. Fulltime employment fell by 35, 600. The results justified the Bank of Canada’s decision to cut rates by 25 bps on Wednesday.
It was the US job numbers that boosted USDCAD because it dashed any remaining hopes for a Fed rate cut in July and lowered the odds for a rate cut in September.
WTI oil prices traded higher in a 75.25-76.02 range, fueled by improved risk sentiment. Traders are hoping for increased crude demand on the back of improved global growth sparked by interest rate cuts.
USDCAD Technicals
The USDCAD technicals are modestly bearish due to the descending channel from March which comes into play at 1.3710. A break above this level would extend gains to 1.3850, initially.
However, the downside is well supported. The 2024 uptrend line is intact around the 1.3550 level, and it is guarded by a cluster of support from the 100 and 200-day moving averages at 1.3587 and 1.3575, respectively, as well as previous bottoms in the 1.3580-1.3600 area.
For today, USDCAD support is at 1.3650 and 1.3610. Resistance is at 1.3740 and 1.3780. Today’s range is 1.3650-1.3750
Chart: USDCAD daily
Source: DailyFX
Upside Surprise to US Jobs Data
Economists at JP Morgan Chase and Citibank will be revising their Fed rate cut forecast for July after nonfarm payrolls surprised to the upside. NFP rose 272,000 (forecast 185,00) average hourly earnings rose 0.4% m/m compared with 0.2% in April while the unemployment rate rose to 4.0% from 3.9%. This is not “rate cut-friendly” data which is why the US 10-year Treasury yield surged to 4.414% from 4.28% where it closed yesterday. S&P 500 futures dropped 0.52%. September rate cut odds dropped from 55.4% yesterday to 48.4% today.
Showing the Way
The ECB cut its benchmark rates by 25 bps yesterday. To many, it’s a big deal because it is the first time it had acted ahead of the Fed in 25 years. To others, it’s because European economic developments warranted the action. Hopes for a series of rate cuts were dashed by this statement: “The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. It will keep policy rates sufficiently restrictive for as long as necessary to achieve this aim.”
“Vote for Me, I’ll Set You Free”
The European puppet-masters are shuffling the decks. 373 million European Union residents are voting for the next European Parliament with votes being cast from June 6th to the 9th. Successful candidates become Members of the European Parliament (MEP) and then they align themselves with like-minded groups in parliament. The socialists are nervous as right-leaning groups are expected to gain seats. For perspective, CNN produced the following graph to highlight the make-up of the outgoing parliament.
EURUSD
EURUSD dropped to 1.0829 from 1.0885 after the higher than expected NFP data, but as long as prices remain above 1.0790, the uptrend from April is intact. The downside may be limited after numerous ECB policymakers said that after cutting rates by 25 bps yesterday, future rate cuts will be data dependent and very gradual.
GBPUSD
GBPUSD traded quietly in a 1.2781-1.2802 range then dropped to 1.2726 after the US jobs number. The prospect of higher US rates for longer coupled with downside UK rate risks is weighing on prices. However, BoE monetary policy concerns have taken a back seat to the UK election.
USDJPY
USDJPY soared to 156.85, post NFP after trading in a 155.12-155.94 range overnight, mainly due to the spike in US Treasury yields. Finance Minister Shunichi Suzuki said that the fall in Japanese foreign reserves was partly due to FX intervention.
AUDUSD and NZDUSD
AUDUSD dropped to .06606 after a quiet overnight session where prices drifted in a 0.6660-0.6682 band. NZDUSD mirrored AUDUSD moves and dropped to 0.6139 from an overnight peak of 0.6204.
USDMXN
USDMXN continues to be underpinned by the fall-out from Sunday’s elections and traded in a 17.8051-18.0275 range overnight. Investors fear anti-business policies from a more dominant left-wing government. For its part, Finance Minister Rogelio Ramirez said that the Federal government deficit would be cut from 6% of GDP to 3% in coming years but didn’t offer any details.
FX high, low, open (as of 6:00 am ET)
Source: Investing.com
China Snapshot
PBoC fix: 7.1106 vs exp. 7.2430 (prev. 7.1108).
Shanghai Shenzhen CSI 300 fell 0.50% to 3574.11
China Trade surplus widens to $52.62 B in May, (forecast 73 B, April 72.35B)
PBoC did not buy any gold in May according to data that showed PBoC reserves unchanged at 72.80 million Troy ounces.
Europeans may be opening another front in the China/US trade war. The EU is planning tariffs on Chinese EV’s and China is threatening to do whatever it takes to protect its interest. That could have ramifications for the 100 plane Airbus A330 order which China is considering.
Chart: USDCNY and USDCNH
Source: Investing.com
