– Canada expected to have gained 25,000 jobs in March.
– Today’s NFP data won’t change FOMC view.
– US dollar grinds out small gains.
USDCAD: open 1.3554-1.3558, overnight range 1.3546-1.3578, close 1.3543, WTI $86.58, Gold, $2291.23
The Canadian dollar was tripped up yesterday. Just as it looked like it was going to rally hard, a cloud of negative risk sentiment descended upon markets due to developments in the Middle East. Iran is fuming because an Israeli attack in Damascus killed two of its Hamas-abetting generals. They promised a retaliatory attack on Israel. Israel, a nuclear power, warned Iran that if it launched an attack on Israel from its soil, Israel would respond in kind.
Traders feared that the Israeli war on Hamas was escalating and flocked to safe-haven currencies. The Japanese yen and Swiss franc rallied as did Treasuries. The 10-year yield fell to 4.30%. However, most of the moves were reversed overnight.
Statistics Canada releases the March employment data and it is expected to show that the number of new jobs climbed by 25,000 in March while the unemployment rate rose to 5.9% from 5.8%. The results will not do anything to change the Bank of Canada’s timing for an interest rate cut.
The market is focused on today’s US nonfarm payrolls report. Traders are betting that if nonfarm payrolls are below 200,000 (forecast 212,000), it would almost guarantee a June rate cut, despite what Fed officials have been saying. If NFP meets or exceeds expectations, the focus shifts to CPI on April 10 to keep June rate cuts alive.
EURUSD traded in a 1.0822-1.0846 range with prices still benefitting from yesterday’s PMI data. Eurozone and German economic data did not spark much interest. German factory orders rose 0.2% m/m in February, which was far better than the 11.4% drop in January but below the 0.8% predicted. Eurozone Retail sales fell 0.7% y/y (forecast -1.3%).
GBPUSD is consolidating yesterday’s gains in a 1.2613-1.2649 range. Prices received a bit of support after the UK Construction Managers’ PMI data showed a small increase in output. (actual 50.2, forecast 50, previous 49.7). The S&P press release noted that, “The marginal overall rise in total construction activity ended a six-month period of contraction.”
USDJPY traded in a 150.81-151.46 range. Safe-haven demand for yen and intervention jawboning by Japan’s Finance Minister and Prime Minister weighed on prices while the 10-year Treasury yield (4.33%) and Fed comments about not needing to rush to lower rates provided support.
AUDUSD failed to add to yesterday’s gains and traded in a 0.6562-0.6593 range. A dash of negative risk sentiment and softer than expected trade numbers limited gains.
