– Risk sentiment flip flops overnight-positive in NY
– US mid-term elections may increase FX volatility
– US dollar falls steeply with EUR outperforming
USDCAD snapshot open 1.3483-87, overnight range 1.3468-1.3552, close 1.3481, WTI $92.60, Gold $1678.29
The Canadian dollar is doing well and in demand. It started Friday, survived a hiccup in Asia trading, and resumed with a vengeance in Europe and early NY trading.
The gains are due to a mix of domestic and US data, China covid rumours, and the US mid-term elections.
Friday, Statistics Canada stunned traders when it reported Canada gained 108,300 jobs in October, over 10 times the number expected and lifted employment to an all-time high. The results suggest that the post-Covid Canadian economic rebound is not slowing.
The US October nonfarm payrolls was stronger than expected. The US gained 2651,000 new jobs, easily beating the 200,000 forecasts but lower than the upwardly revised 315,000 in September.
Traders concluded that the NFP report was not strong enough to force the Fed to increase rates more than the 50-bps expected in December.
That data was released as rumours swirled that China would ease Covid restrictions thereby helping to reinvigorate the global economy. Risk sentiment turned positive, the US dollar sank, and equities soared.
However, Chinese authorities denied the rumor Saturday. A health official said, “Practice has proved that our pandemic prevention and control policy and a series of strategic measures are completely correct, and the most economical and effective.”
That news drove the US dollar sharply higher at the Asia open, but the rally halted in Europe and the greenback resumed its Friday slide.
Traders are looking ahead to Tuesday’s US mid-term elections and are hoping history repeats itself. Wall Street has a history of rallying after mid-term elections and traders are hoping this year is no different. The S&P 500 closed with a 1.36% gain Friday and S&P futures are 0.42% higher today. The stock market gains are fueling Canadian dollar strength.
EURUSD rose from 0.9901 to 1.0006 overnight underpinned by better-than-expected German Industrial production (actual 2.6%, forecast 0.5%).
GBPUSD rallied from 1.1292 to 1.1476 then slid to 1.1465 in NY. Prices are tracking broad US dollar sentiment although the fall-out from the dovish Bank of England monetary policy meeting last week may limit gains.
USDJPY is trading soft in a 146.44-147.56 range due to broad US dollar weakness while ignoring the firm US 10-year Treasury yield.
AUDUSD traded in a 0.6407-0.6478 range with the bottom occurring when Asia opened. NZDUSD tracked AUDUSD moves in a 0.5865-0.5938 band.
There are no US economic reports today.