The Canadian dollar had a volatile trading return from the civic holiday. The USD/CAD broke above the 1.31 price level. Economic surveys were positive for the loonie, but the biggest impact at the beginning of the North American trading sessions were the growing concerns about the U.S. economy slowing down. The underwhelming advanced GDP delivered on Friday with a 1.6 percent was followed with the ISM PMI on Monday at a disappointing 52.6 and inflation data released by the Bureau of Economic Analysis published today was a
Canadian manufacturing inched higher in July. The RBC Canadian Manufacturing PMI showed a rise to 51.9. Domestic demand helped offset the slowdown in export sales. The depreciation of the CAD has made imports more expensive but still show a PMI above 50 which is expansionary. The conference board of Canada also showed the optimistic results from the latest survey at 97.8 but still remains in neutral territory (below 100).
The loonie will get little support from Canadian economic calendar this week. Canadian employment data will be the highlight but will eclipsed by the U.S. non farm payrolls (NFP) released at the same time. The eye of the market will be focused on the NFP specially after the growing doubts about the U.S. growth.
The USD/CAD lost 0.098 percent in the last 24 hours. The currency is trading at 1.3088 after USD weakness has come and gone. The loonie has also suffered from its high correlation to the price of oil, but it had reaped some of the benefits of the recovery as bargain hunters bought into oil.
West Texas gained 1.053 percent in the last 24 hours. The price of crude is trading at $3919. Energy prices recovered at the expense of the USD and doubts about the U.S. economy. The main narrative for oil markets has been the hanging oversupply as global supply has failed to get traction. Energy ministers from crude producers have been clear that there are no production cuts in the near future but they are expecting stability at the end of the year. The downward pressure that had subsided after the Saudi Arabia and Russia’s output freeze agreement is now back in effect as producers hit record highs in July despite the falling price of energy.
The ability of central banks to steer the market has diminished as more quantitative easing and stimulus programs are launched to underwhelmed investors. The Bank of Japan (BOJ) and in a highly anticipated move the Bank of England (BoE) are looking for options to boost economic growth. The Bank of Canada (BoC) was proactive last year, but with a limited toolkit given the record low interest rate at 0.50 percent but is now looking at a hybrid approach alongside the Canadian government fiscal stimulus measures.
U.S. employment data will start rolling out Wednesday with the release of the ADP payrolls, U.S. unemployment claims on Thursday and the big event on Friday with the publication of the U.S. non farm payrolls (NFP).
Market events to watch this week:
Wednesday, August 3
8:15 am USD ADP Non-Farm Employment Change
10:00 am USD ISM Non-Manufacturing PMI
10:30 am USD Crude Oil Inventories
Thursday, August 4
7:00 am GBP BOE Inflation Report
7:00 am GBP MPC Official Bank Rate Votes
7:00 am GBP Monetary Policy Summary
7:00 am GBP Official Bank Rate
7:30 am GBP BOE Gov Carney Speaks
8:30 am USD Unemployment Claims
Friday, August 5
8:30 am CAD Employment Change
8:30 am CAD Trade Balance
8:30 am CAD Unemployment Rate
8:30 am USD Average Hourly Earnings m/m
8:30 am USD Non-Farm Employment Change
8:30 am USD Unemployment Rate
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar
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