FX Looks to Loonie

Posted on

Market Drivers May 11, 2018
FX Rangebound
All eyes on Canadian data
Nikkei 1.16% Dax -0.09%
Oil $71/bbl
Gold $1322/oz.
Bitcoin $8824

Europe and Asia:
No Data

North America:
CAD Employment 8:30
USD U of M 8:30

FX markets were moribund on Friday with most of the majors stuck in 20 pip ranges in quiet, listless trade with little event risk on the calendar.

Cable remained pinned to the 1.3500 figure after yesterday’s confusing BOE press conference in which Governor Carney tried to assure the markets that the slowdown in Q1 activity was temporary, but nevertheless was serious enough for the central bank to suspend its normalization policy for now.

The odds of a BOE rate hike by November did rise to 90% in the aftermath of the presser, but as many analysts have pointed out Mr. Carney and company face a series of problems ahead of a planned hike this year. Most important of all is the need for some rebound in the economic data. So far, after a very slow Q1 marked by terrible weather across the British Isles Q2 data has been disappointing. The only bright spot has been an uptick in real wage growth, but that has not translated into better consumer demand or corporate spending. If UK economy continues to grow at this glacial pace the prospect of any rate hike will diminish and Mr. Carney – already dubbed in the financial press as “the unreliable boyfriend” will have to walk his comments once again.

Meanwhile, in North America, all focus will be on Canadian labor data due at 12:30 GMT. The markets are looking for a slight pullback to 17K from 32K the month prior with unemployment remaining the same at 5.8%. If the data meets or beats the forecast it will be the third straight month of gains and 21st month out of the last 22 that the economy gained jobs. While the uncertainty of NAFTA negotiations continues to dog the loonie, the single currency has been supported by better than expected GDP growth of 0.4% and a solid bid in crude prices which have remained above the $71/bbl. USDCAD has been trading well all week with loonie up more than 200 pips against the buck after the pair rejected the 1.3000 figure and today’s news could drive it even lower towards 1.2600 if job data confirms solid growth.

Boris Schlossberg
Managing Director

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