The Canadian dollar got a boost from a massive gain of 54,500 jobs in May. All the job gains came in the full time category and make a strong case that the Bank of Canada (BoC) could start hiking rates in early 2018. Oil recovered on Friday after a bad week for crude after the surprise buildup in US weekly inventories released on Wednesday. WTI is trading at $45.76 but still far from the weekly highs of $48.23.
Political risk drove the direction of the dollar last week, but going forward the US will release key economic data as well as the expected rate hike from the Fed further putting pressure on the loonie. The Trump administration continues to pledge a tax reform and infrastructure spending policies but until they materialize the June rate hike might be the last one for the US central bank in 2017.
US Treasury Secretary Steve Mnuchin was in Ottawa to discuss trade, taxes and infrastructure. Given the upcoming NAFTA renegotiations this visit marked the first one in a decade for a US Treasury Secretary. The visit is intended to get a sense of timing and upcoming issues, while also discussing how to strengthen the relationship between the two nations.
The USD/CAD lost 0.256 percent in the last five days. The currency pair is trading at 1.3463. The loonie continues to be stuck in a range and not even the political pressures of James Comey and a massive jobs report in Canada could give the currency an edge against the greenback.
The USD was able to escape from under the geopolitical risk cloud and finish the week higher with the exception of commodity currencies that got a boost from the recovery of oil.
The June rate hike by the Fed has been given a 95 percent probability based on Fed futures prices by the CME FedWatch tool implicating its all but priced into the dollar. The economic data for the second half of the year will be more important if the Fed is to fulfill its forecasts of 3 or more rate hikes. So far it has recouped the trust of the market with a rate hike in March and what could potentially be a follow up in June.
Oil lost 3.612 percent in the last week. The price of West Texas Intermediate is trading at $45.71 after the massive buildup on Wednesday on the US weekly crude inventories. The forecast had called for another drawdown and instead the shock rise in inventories in the same week as the rift between Qatar and major Arab states put downward pressure on crude prices. The Organization of the Petroleum Exporting Countries (OPEC) has stabilized prices since they announced their production agreement with major producers last year that was put into effect in January. Nearing the end of the original six month duration members have agreed to a 9 month extension. Their goal of price stability has been met, but a glut in energy products remains as producers not part of the deal like the United States, Canada and Brazil have increased production. The US in particular has gone from a net importer of crude to an exporter offsetting the efforts from OPEC.
Weekly inventories are released every Wednesday at 10:30 am EDT. Last week there was a buildup of 3.3 million barrels when a drawdown of 3.1 million was expected. Oil disruptions have been the only factor that have driven oil prices higher, but due to the nature of the disruptions they are not consistent. Case in point the current Nigerian pipeline leaks. Nigeria and Libya due to disruptions are exempt form the production cut, but as soon as those go away the OPEC will face further internal pressure as the oil glut will continue due to stagnant demand for energy around the globe.
Market events to watch this week:
Tuesday, June 13
4:30 am GBP CPI y/y
8:30 am USD PPI m/m
10:00 pm CNY Industrial Production y/y
Wednesday, June 14
4:30 am GBP Average Earnings Index 3m/y
8:30 am USD CPI m/m
8:30 am USD Core CPI m/m
8:30 am USD Core Retail Sales m/m
8:30 am USD Retail Sales m/m
10:30 am USD Crude Oil Inventories
2:00 pm USD FOMC Economic Projections
2:00 pm USD FOMC Statement
2:00 pm USD Federal Funds Rate
2:30 pm USD FOMC Press Conference
6:45 pm NZD GDP q/q
9:30 pm AUD Employment Change
Thursday, June 15
3:30 am CHF Libor Rate
3:30 am CHF SNB Monetary Policy Assessment
3:30 am CHF SNB Press Conference
4:30 am GBP Retail Sales m/m
7:00 am GBP MPC Official Bank Rate Votes
GBP Monetary Policy Summary
GBP Official Bank Rate
8:30 am USD Unemployment Claims
Tentative JPY Monetary Policy Statement
Friday, June 16
Tentative JPY BOJ Policy Rate
2:30 am JPY BOJ Press Conference
8:30 am CAD Core Retail Sales m/m
8:30 am USD Building Permits
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar