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– Upside risk to Canada job gain forecast of 25,000.
– NFP revisions are key to US dollar trading today.
– USD opens little changed after quiet overnight session.
USDCAD: open 1.4325 overnight range 1.4302-1.4327, close 1.4306WTI $71.15, Gold, $2867.47
The Canadian dollar drifted higher alongside broad US dollar weakness yesterday but traded quietly overnight. Statistics Canada is expected to report that Canada gained 25,000 new jobs in January while the unemployment rate will rise to 6.8% from 6.7%. There is an upside risk to the headline number due to the temporary cuts to GST which has fueled restaurant dining.
However the Canadian data will be overshadowed by the US numbers. If NFP shows evidence (which the market anticipates) that the employment market is gradually cooling, it may spark further US dollar selling. That’s because soft data may pull the Fed off the sidelines. USDCAD will see added selling pressure in a cooling US employment market and a hotter Canadian job market.
Bank of Canada Governor Tiff Macklem’s speech for a Mexican panel pretty much stated the obvious. He said that policymakers are facing new uncertainty due to Trump’s tariff threats. He added that those threats were already impacting business and household confidence.
NFP projections vary widely, but the consensus points to a gain of 170,000 jobs, with the unemployment rate expected to remain at 4.1%.
EURUSD opened in New York at 1.0361 after drifting between 1.0356 and 1.0406 overnight. The currency pair was weighed down by weaker-than-expected German industrial production data, which showed a decline of 2.4% month-over-month. Concerns over potential US tariffs on European goods are likely to cap further gains.
GBPUSD opened at 1.2418, after trading in a 1.2407-1.2510 range. The currency nearly erased losses from the previous session following the Bank of England’s dovish policy stance. The BoE revised its GDP forecast downward while raising inflation projections, fueling stagflation fears. However, there was some optimism as the Halifax House Price Index increased by 0.7% in January.
USDJPY opened in New York at 152.52 after trading between 151.81 and 152.89 overnight. The pair advanced steadily but remains under pressure as expectations grow that the Bank of Japan will tighten monetary policy while the Federal Reserve may be forced to pivot toward easing sooner than expected.
AUDUSD began the New York session at 0.6284, remaining within a narrow overnight range of 0.6273 to 0.6298. Price action was subdued as traders stayed on the sidelines ahead of the US employment report. Broader concerns over the ongoing trade tensions between China and the US continue to act as a headwind for the Australian dollar.
Fed speakers include Governor Adriana Kugler and Michelle Bowman both voting members of the FOMC.
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