– French election surprise sparks short-lived reactions.
– Fed Chair Powell testifies to Congress tomorrow and Wednesday.
– US dollar opens with tiny losses in uninspired trading.
USDCAD: open 1.3632, overnight range 1.3628-1.3648, previous close 1.3641WTI $82.22, Gold, $2370.52
The Canadian dollar is struggling to find direction following an uneventful overnight session while erasing all of Friday’s post-employment report gains.
Canada lost 1,400 jobs in June, well below the forecast for a gain of 22,500. The unemployment rate rose to 6.4% from 6.2%. Even worse, Canada’s population rose by 1.1 million in the past 12 months, but the economy only produced 343,000 jobs.
The US nonfarm payrolls report was a tad weaker than expected, which suggests that the American economy is slowing. Bond traders raised their bets for a September rate cut to over 72% following the data.
Oil prices inched lower with WTI dropping from 83.32 to 82.11 despite ongoing Israel and Hezbollah tensions and Hurricane Beryl raising the risk of supply disruptions.
Fed Chair Jerome Powell testifies before Congress on Tuesday. Analysts are speculating as to whether he will adopt a more dovish tone following the hawkish dot-plot forecasts released on June 12.
Asian equity markets closed with losses across the board after the surprising election performance by the far-left soured risk sentiment.
Australia’s ASX 200 lost 0.76% while Japan’s Nikkei fell 0.32%. European bourses recouped initial losses and rallied, led by a 0.37% gain in the German DAX. S&P 500 futures are flat.
EURUSD dropped to 1.0802 from 1.0843 on the news that far-left parties won the most seats in the French election. A coalition of left-wing parties including the Nouveau Front Populaire (NFP), La France Insoumise (LFI), Socialists (PS), and Ecologists (EELV) won 182 seats.
President Emmanuel Macron’s bloc came in second with 168 seats, while Marine Le Pen’s National Party (NP) finished third with 168 seats. The NP party gained the most seats of any other party. Now the fun begins as politicians jockey for power. Global markets are more concerned with the fiscal policies of the new government and until they are better understood, EURUSD gains will be limited.
GBPUSD traded quietly in a 1.2789-1.2823 range with traders waiting for fiscal policy announcements from the incoming Labour Government and comments by Powell on Tuesday.
USDJPY dipped then rallied in a 160.26-161.12 band. The fear of BoJ intervention and rising odds of a Fed rate cut in September are weighing on prices.
AUDUSD drifted in a 0.6735-0.6762 range overnight with prices underpinned by expectations that the RBA leaves rates unchanged and sticks to its hawkish bias.
The US and Canadian economic calendars are empty.