Home Daily Commentaries The Loonie erases some of Friday’s gains following a lack of economic data.

The Loonie erases some of Friday’s gains following a lack of economic data.

Daily Currency Update

The surprise last Friday when the unemployment rate hit a new record low in Friday’s November jobs Report compares with the Bank of Canada’s less bright outlook that appeared in the middle of last week. Those positive employment numbers made the USD/CAD pair fall quickly to 1.3254, to a 5 day low.

However, this morning, the USD/CAD pair is rising again, probably because the labor force survey is especially elusive from month to month and the BoC uses a different measure to judge labor market slack. Furthermore, crude is falling 1 percent this morning, apparently having a consolidation in price and trading in a range of 50 and 53 US dollars per barrel.

Key Movers

Last week we saw weaker than expected non-farm payroll figures, which encouraged investors to sell the US dollar. This morning, the US dollar is trading flat regarding the previous week’s closing price. The dollar recovered some of the overnight loses, but there are still lingering concerns about the Fed raising rates next week and that is weighing on the Greenback so far today.

The primary data release for the US dollar is inflation data because of its impact on interest rates, which is obviously a primary driver of currencies. This data will be released on Wednesday. The other critical hard data release for the Greenback is retail sales, which will be released at 8:30 a.m. on Friday. It is forecast to show a slower 0.1 percent rise in November from the previous month’s 0.8 percent.

A weak US dollar has benefitted the Euro with EUR/USD reclaiming the 1.1400 handle since Fridays US data-miss. Aside from the Italian budget saga, it has been relatively quiet from the Eurozone of late; however, we get some newsworthy events later this week with the European Central Bank’s latest interest rate decision due on Thursday. No change in interest rates is expected until the second half of next year; however, we should get final confirmation that its quantitative easing program has come to an end, signaling another milestone in the Euro Zone recovery since the financial crisis. The EUR/USD pair is up 0.18 percent to 1.1413.

It is one of the most crucial weeks for the Pound since the 2016 EU Referendum with parliament due to vote tomorrow night on UK Prime Minister Theresa May’s proposed Brexit deal. After months of negotiating and in-fighting within her own Conservative Party, May agreed to a deal in principle with the EU last month, and tomorrow night MPs get to vote on whether they are happy to proceed by its terms. It’s looking likely that May is heading for defeat; however, the margin of failure and the repercussions will be the main talking points. Should May lose and the EU offers a token amendment with regards to the Irish border, then we could be set for another vote early next year whereby MPs may be inclined to switch sides and vote in favor of the plan “in the national interest.” If there is no such offering from the EU, then we could be heading for a leadership challenge, general election and another referendum amongst other possibilities. A short time ago the European Court of Justice ruled that Britain can unilaterally revoke the Brexit vote and choose to remain in the EU.

The GBP/USD is trading in new lows at 1.2617 falling 0.86 this morning.

The commodity currencies rose on Friday's weak US data with AUD/USD jumping to 0.7242 before slowly retracting. With most stock exchanges around the world continuing to trade in the red this morning following last week’s sell-off, a risk-off trading environment has offset the upward pressure from a weak Greenback. There are only a couple of mid-tier data releases this week from Australia with tonight seeing the Australian Bureau of Statistics publishing its quarterly House Price Index ahead of Tuesday night’s Westpac Consumer Sentiment number. AUD/USD is at 0.7211.

It is all quiet on the Kiwi front at the moment with another data-thin week ahead of us. US inflation figures, the parliamentary Brexit vote and Thursday night’s Chinese Industrial Production and Fixed Asset Investment numbers will likely be the main drivers for the local buck. NZD/USD is just below the 0.6900 handle with NZD/USD at 0.6885.

Expected Ranges

  • USD/CAD: 1.3243 - 1.3367 ▼
  • CAD/EUR: 0.6540 - 0.6620 ▲
  • CAD/GBP: 0.5836 - 0.6000 ▼
  • CAD/AUD: 1.0321 - 1.0430 ▲
  • CAD/NZD: 1.0844 - 1.0940 ▲