The US dollar extended Friday’s slide lower in overnight trading. FX markets keyed in on the slower than expected US wage growth and higher unemployment rate in Friday’s employment report and sold US dollars. Average hourly earnings rose 2.7%. (forecast 2.8%) and the unemployment rate rose to 4.0% from 3.8%. Economists explained the variances as due to “more people looking for work.” Trader’s ignored them.
The US/China trade skirmish was benign on the weekend which contributed to the greenback’s weakness as “risk-averse” trades were unwound.
Sterling was the star performer. It gapped higher at the open, jumping to 1.3315 from Friday’s closing level of 1.3287. Trader’s reacted to news that UK Prime Minister Theresa May’s cabinet reluctantly backed her compromise plan for Brexit, which counts on the European Union being “more generous.” UK Foreign Secretary Boris Johnston was one of the reluctant signatories to the plan, describing it as “polishing a turd.”
Britain’s Chief Brexit negotiator David Davis apparently saw through the polish. He resigned. He said the UK was “giving away too much and too easily.” His resignation raises questions about the PM May’s longevity as the leader, but for this morning, GBPUSD traders didn’t care, and sterling tacked higher with the broad US dollar weakness, rising to 1.3361 before easing back to 1.3333 in early New York trading.
The lack of trade drama and fall-out from the US employment report lifted EURUSD which rose from 1.1738 to 1.1780. AUDUSD also rallied on the improved risk tone, rising from 0.7429 to 0.7480.
USD/CAD has edged lower, aided by sentiment that Friday’s Canadian jobs data confirmed a rate hike on Wednesday. Many participants expect a “dovish hike” and they could be in for a surprise. Some economists point to the positive Business Outlook Survey and gains in Manufacturing PMI data as evidence that the domestic economy is growing above trend.
President Trump won’t be far from the headlines. He is heading to London to visit the Queen (and a couple of politicians as well) NATO may be on his hit list. The President is annoyed that most member countries do not contribute their fair share (Hello! Canada) and if threatens to pull the US out of the agreement, the leaders will scramble for their ATM cards.
However, if the UK manages to advance to the FIFA World Cup final on Wednesday, most Brits will be so deep “into their cups” to notice that Trump is in their country. Historians have noted that the last time Germany didn’t make it to the “knock-out” stage in the World Cup was 1938. We all know how that worked out.
There are no US or Canadian data releases of note today.
USDCAD Technical Outlook
The intraday USDCAD technicals are bearish while prices are below 1.3130 looking for a break of 1.3050 to extend losses to 1.3010 and then 1.2950. A move above 1.3130 would target 1.3180. For today, USDCAD support is at 1.3060 and 1.3010. Resistance is at 1.3110 and 1.3130.
Today’s Range 1.3050-1.3110