– Canadian employment data expected to show 27,000 new jobs.
– Bank of Canada Business Outlook Survey due at 10:30 am.
– US dollar a tad softer compared to the close but remains bid.
USDCAD: open 1.3767, overnight range 1.3736-68, close 1.3740, WTI $75.23, Gold, $2637.28
The Canadian dollar continues to be under stress due to sharply diverging U.S. and Canadian interest rate and economic growth outlooks.
Yesterday, U.S. September inflation numbers surprised to the upside, raising concerns about the future pace of Fed rate cuts. Atlanta Fed President Raphael Bostic hinted that he would favor pausing rate cuts in November, and he noted that his dot-plot forecast only includes one more cut penciled in for 2024. However, he was the lone wolf among recent Fed speakers. New York Fed President John Williams stated he is “still hoping to continue the process of moving the monetary stance to a more neutral setting over time.” Chicago Fed President Austan Goolsbee did not seem concerned about the uptick in inflation, noting that “the overall trend was clearly moving down.”
Bond traders ignored those comments and pushed the 10-year Treasury yield from 4.01% on October 9 to 4.12% overnight. These gains have underpinned the U.S. dollar.
Canadian employment data is in focus today. Canada is expected to have added 27,900 new jobs in September, but the unemployment rate is expected to rise to 6.7% from 6.6%. The key issue is that Canada’s population growth continues to outpace the country’s ability to create jobs, exacerbating strains on the healthcare system and intensifying the housing crisis.
More importantly, for the BoC, is today’s Business Outlook Survey. The key BOS Survey Indicator has shown downbeat consumer and business sentiment for the last three quarters. Continued weakness could push the BoC to cut interest rates aggressively, with many analysts expecting a 50 bp cut on October 23
EURUSD remains within the 1.0900-1.0955 range, with little reaction to German inflation data that met expectations. Traders are focused on U.S. economic data and rate outlooks, with the divergence in monetary policy between the ECB and the Fed preventing significant gains for the euro.
GBPUSD chopped around within the 1.3022-1.3094 range. Mixed UK data, including GDP, trade, and industrial production figures, did not stir much interest. Dovish expectations for the Bank of England, contrasted with neutral expectations for the Fed, are keeping the pair in check.
USDJPY moved between 148.31 and 149.57, currently trading at 149.07. The pair has been supported by a rise in the U.S. 10-year Treasury yield, which has climbed from 4.01% to 4.12% this week.
AUDUSD traded with a slight positive bias in the 0.6701-0.6750 range, with traders looking for a potential stimulus announcement from Chinese officials over the weekend. NZDUSD followed a similar pattern, tracking alongside the Australian dollar’s movement.
