– Markets are quiet as many countries closed for holidays.
– Focus is on Tuesday’s US CPI data.
– US opens on a mixed note-CAD flat.
USDCAD: open 1.3460-66, overnight range 1.3450-1.3470, close 1.3457, WTI $76.19, Gold, $2021.38
FX markets are off to a very slow start thanks to widespread holidays in Asia, the Caribbean, and South America. The Lunar New Year kicked off on the weekend and Chinese markets will be shuttered all week. In addition, Australians celebrated Hobart Day and South America and many Caribbean nations enjoyed Carnival Monday. Americans and Canadians are not on holiday, but overindulgence around Super Bowl LVIII will see many traders nursing hangovers and not positions.
The Canadian dollar rallied sharply on the heels of the Labour Force Survey on Friday. Canada created 37,300 new jobs in January, and the unemployment rate dipped to 5.7%. Then reality hit home, and the Canadian dollar dropped as sharply as it had rallied. That’s because the headline masks a very weak and alarming trend. The only sectors hiring are governments. They added 47,600 jobs, which means the private sector is paying for a sharply increasing public sector which does nothing to increase the country’s productivity.
The Canadian dollar also saw support from hawkish comments by Bank of Canada Governor Tiff Macklem last week. He continues to imply that rate hikes are a possibility. Even so, the chances are slim to none. The BoC just finished telling Canadians and Government Finance Committees that the Governing Council’s focus has shifted to how long to leave rates in restrictive territory from a tightening bias. The BoC would look extremely foolish if they raised rates.
This week’s focus is the US inflation report on Wednesday. Weaker than expected data will encourage rate cut speculation and drive the US dollar lower.
EURUSD popped then dropped in a 1.0767-1.0806 band. ECB policy members were chirping up a storm of dovish comments which, combined with technical resistance, drove EURUSD from its peak.
GBPUSD was adrift in a 1.2614-1.2655 band due to a lack of catalysts. That will change tomorrow with the release of the UK employment report and US inflation.
USDJPY traded unevenly and fell from 149.30 to 148.99, although the downside was supported by the US 10-year Treasury yield hovering around 4.17%.
AUDUSD traded quietly in a 0.6512-0.6532 range while NZDUSD (its markets were open) drifted in a 0.6121-0.6152 range. Comments from RBNZ Governor were hawkish as he opined about the need for restrictive monetary policy.
There are no top-tier economic reports from Canada or the US today.