🇨🇦#Today's Canadian employment report may define the CAD trend
#The Canadian dollar (CAD) gained 0.06% on Thursday as the price of crude oil, Canada's major export item, surged by more than 3% on the Israel ceasefire rejection.
#Possible effects for traders
USDCAD has been in an uptrend since the end of 2023, when the market started to scale back on its expectations for an early rate cut by the Federal Reserve (Fed). At the same time, the market doesn't expect the Bank of Canada #(BOC) to be particularly dovish, either. Fundamentally, the divergence between U.S. and Canadian monetary policies favours the Canadian dollar. That is because investors expect more interest rate cuts from the Fed than from the BOC. According to the interest rate swap market data, traders currently price in more than 115 basis points (bps) worth of rate cuts by the Fed and just under 80 bps of cuts by the BOC in 2024. Indeed, the protocols from the recent BOC meeting confirmed that policymakers were concerned about cutting borrowing costs too soon amid persistent inflation.
#USDCAD was essentially unchanged during the Asian and early European trading sessions. Today, the main event for CAD traders is the release of the monthly employment statistics at 1:30 p.m. UTC. The data release usually affects the market significantly. The report includes the latest nonfarm employment figures and unemployment rate—one of the key metrics the regulator uses to decide on changes in monetary policy. #If employment rises faster than expected and the unemployment rate drops, the short-term bearish trend in USDCAD may continue, bringing the pair down towards the critical 1.34000 level. Worse-than-expected results may lead to a sharp upward correction in USDCAD, possibly taking the pair above the important 1.35000 level.
#The Canadian dollar (CAD) gained 0.06% on Thursday as the price of crude oil, Canada's major export item, surged by more than 3% on the Israel ceasefire rejection.
#Possible effects for traders
USDCAD has been in an uptrend since the end of 2023, when the market started to scale back on its expectations for an early rate cut by the Federal Reserve (Fed). At the same time, the market doesn't expect the Bank of Canada #(BOC) to be particularly dovish, either. Fundamentally, the divergence between U.S. and Canadian monetary policies favours the Canadian dollar. That is because investors expect more interest rate cuts from the Fed than from the BOC. According to the interest rate swap market data, traders currently price in more than 115 basis points (bps) worth of rate cuts by the Fed and just under 80 bps of cuts by the BOC in 2024. Indeed, the protocols from the recent BOC meeting confirmed that policymakers were concerned about cutting borrowing costs too soon amid persistent inflation.
#USDCAD was essentially unchanged during the Asian and early European trading sessions. Today, the main event for CAD traders is the release of the monthly employment statistics at 1:30 p.m. UTC. The data release usually affects the market significantly. The report includes the latest nonfarm employment figures and unemployment rate—one of the key metrics the regulator uses to decide on changes in monetary policy. #If employment rises faster than expected and the unemployment rate drops, the short-term bearish trend in USDCAD may continue, bringing the pair down towards the critical 1.34000 level. Worse-than-expected results may lead to a sharp upward correction in USDCAD, possibly taking the pair above the important 1.35000 level.
#EURUSD drops to a 3-month low after the U.S. inflation data release
#The euro (EUR) lost almost 0.6% on Tuesday after the U.S. data showed that inflation rose more than expected in January. The report fuelled expectations that the Federal Reserve (Fed) will hold interest rates steady in March and May.
#Possible effects for traders
Yesterday's data showed that the U.S. Consumer Price Index (CPI) rose by 0.3% month-on-month in January, above the 0.2% increase expected by economists polled by Reuters. Likewise, the increase in the core CPI was higher than expected, immediately reducing the probability of an imminent interest rate cut by the Fed. Currently, the market has completely priced out the chance of a 25 basis point (bps) rate cut in March, considering only a 37% chance of a 25 bps cut in May.
#The key message from today's CPI is that it's slowing but less than expected. The reading supports the Fed's decision to continue to wait for more assurance that inflation is well contained,' said Dec Mullarkey, the managing director at SLC Management. Investors' long-term interest rate expectations have also shifted. According to the interest rate swap market data, traders expect only 90 bps worth of rate cuts by the Fed and almost 110 bps worth of rate cuts by the European Central Bank in 2024. As a result, the divergence in monetary policy expectations exerts downward pressure on EURUSD.
#EURUSD was attempting to recover during the Asian and early European trading sessions. Today, traders will probably continue to digest yesterday's data, so the established bearish trend might continue. Additional volatility may be triggered by the release of eurozone Gross Domestic Product figures at 10:00 a.m. UTC. If the numbers are lower than expected, the decline in #EURUSD might deepen, pushing the pair below 1.07000. Otherwise, the pair may rebound, targeting the 1.07600 area.
#The euro (EUR) lost almost 0.6% on Tuesday after the U.S. data showed that inflation rose more than expected in January. The report fuelled expectations that the Federal Reserve (Fed) will hold interest rates steady in March and May.
#Possible effects for traders
Yesterday's data showed that the U.S. Consumer Price Index (CPI) rose by 0.3% month-on-month in January, above the 0.2% increase expected by economists polled by Reuters. Likewise, the increase in the core CPI was higher than expected, immediately reducing the probability of an imminent interest rate cut by the Fed. Currently, the market has completely priced out the chance of a 25 basis point (bps) rate cut in March, considering only a 37% chance of a 25 bps cut in May.
#The key message from today's CPI is that it's slowing but less than expected. The reading supports the Fed's decision to continue to wait for more assurance that inflation is well contained,' said Dec Mullarkey, the managing director at SLC Management. Investors' long-term interest rate expectations have also shifted. According to the interest rate swap market data, traders expect only 90 bps worth of rate cuts by the Fed and almost 110 bps worth of rate cuts by the European Central Bank in 2024. As a result, the divergence in monetary policy expectations exerts downward pressure on EURUSD.
#EURUSD was attempting to recover during the Asian and early European trading sessions. Today, traders will probably continue to digest yesterday's data, so the established bearish trend might continue. Additional volatility may be triggered by the release of eurozone Gross Domestic Product figures at 10:00 a.m. UTC. If the numbers are lower than expected, the decline in #EURUSD might deepen, pushing the pair below 1.07000. Otherwise, the pair may rebound, targeting the 1.07600 area.
#The euro remains under downward pressure
The euro (EUR) was moving sideways on Monday due to the U.S. bank holiday.
#Possible effects for traders
According to Bundesbank's monthly report on Monday, Germany is probably experiencing a recession: external demand is weak, consumer behaviour is hesitant, and domestic investment is suppressed due to high borrowing costs. Growing energy prices have been challenging for Germany. Its industrial economy has been stagnant or declining for 4 consecutive quarters, impacting the entire eurozone. 'There is still no recovery for the German economy,' stated analysts at the Bundesbank. 'Output could decline again slightly in the first quarter of 2024. With the second consecutive decline in economic output, the German economy would be in a technical recession,' they noted.
#Despite a shrink in the economy, the German government considers the current downturn temporary, influenced by unique challenges rather than fundamental flaws in economic strategy. According to Bundesbank, economic weakness in Germany is expected to persist with declining foreign industrial demand and reduced investment due to higher financing costs. However, the Bundesbank doesn't think Red Sea shipping disruptions will significantly affect the economy. Moreover, the labour market is expected to remain relatively stable, preventing a severe recession.
#In the Asian trading hours, EURUSD experienced a decline but rose in the early hours of the European session. Today, the economic calendar lacks significant events, so trading activity will likely increase only later this week. EURUSD rebounded from the support level of 1.07000 and is currently in a local bullish trend. However, fundamentally, the euro is still under pressure. EURUSD has been weakening since the beginning of the year, and there is no strong momentum to reverse the trend.
The euro (EUR) was moving sideways on Monday due to the U.S. bank holiday.
#Possible effects for traders
According to Bundesbank's monthly report on Monday, Germany is probably experiencing a recession: external demand is weak, consumer behaviour is hesitant, and domestic investment is suppressed due to high borrowing costs. Growing energy prices have been challenging for Germany. Its industrial economy has been stagnant or declining for 4 consecutive quarters, impacting the entire eurozone. 'There is still no recovery for the German economy,' stated analysts at the Bundesbank. 'Output could decline again slightly in the first quarter of 2024. With the second consecutive decline in economic output, the German economy would be in a technical recession,' they noted.
#Despite a shrink in the economy, the German government considers the current downturn temporary, influenced by unique challenges rather than fundamental flaws in economic strategy. According to Bundesbank, economic weakness in Germany is expected to persist with declining foreign industrial demand and reduced investment due to higher financing costs. However, the Bundesbank doesn't think Red Sea shipping disruptions will significantly affect the economy. Moreover, the labour market is expected to remain relatively stable, preventing a severe recession.
#In the Asian trading hours, EURUSD experienced a decline but rose in the early hours of the European session. Today, the economic calendar lacks significant events, so trading activity will likely increase only later this week. EURUSD rebounded from the support level of 1.07000 and is currently in a local bullish trend. However, fundamentally, the euro is still under pressure. EURUSD has been weakening since the beginning of the year, and there is no strong momentum to reverse the trend.
🇨🇦 Volatility in USDCAD will rise today due to important reports releases
The Canadian dollar (CAD) lost 0.36% on Wednesday, as Brent and WTI oil prices dropped after the U.S. reported a larger-than-expected increase in crude oil stocks.
#Possible effects for traders
USDCAD has been trading in a clear bullish trend since the beginning of 2024, as investors pushed back their expectations of imminent rate cuts by the Federal Reserve (Fed). At the same time, traders expect the Bank of Canada (BOC) to start cutting interest rates earlier than the Fed, pricing in a 40% probability of a 25-basis-point rate cut in April, while expecting the Fed to lower rates no earlier than June. This divergence in traders' expectations is exerting upward pressure on USDCAD. However, the strong resistance the pair is facing at 1.36000 may be impossible to break without a solid fundamental impulse. This impulse may occur today as both countries will release important macroeconomic reports.
#USDCAD was declining slightly during the Asian and early European trading sessions. Today, traders should focus on 2 critical reports at 1:30 p.m. UTC. First, Statistics Canada will publish the Gross Domestic Product (GDP) report, and the U.S. will release the Personal Consumption Expenditure (PCE) Price Index. The U.S. data tends to have a more sizeable impact on the market, and it may balance out any effect from the Canadian data. Overall, volatility in USDCAD could be quite substantial. The most bullish impact on USDCAD will be in case of weaker-than-expected Canadian GDP and higher-than-expected U.S. PCE data. Thus, USDCAD may move towards 1.36500. Conversely, strong Canadian GDP figures and lower U.S. inflation numbers will put substantial bearish pressure on the pair, and the mid-term bullish trend in USDCAD may reverse.
The Canadian dollar (CAD) lost 0.36% on Wednesday, as Brent and WTI oil prices dropped after the U.S. reported a larger-than-expected increase in crude oil stocks.
#Possible effects for traders
USDCAD has been trading in a clear bullish trend since the beginning of 2024, as investors pushed back their expectations of imminent rate cuts by the Federal Reserve (Fed). At the same time, traders expect the Bank of Canada (BOC) to start cutting interest rates earlier than the Fed, pricing in a 40% probability of a 25-basis-point rate cut in April, while expecting the Fed to lower rates no earlier than June. This divergence in traders' expectations is exerting upward pressure on USDCAD. However, the strong resistance the pair is facing at 1.36000 may be impossible to break without a solid fundamental impulse. This impulse may occur today as both countries will release important macroeconomic reports.
#USDCAD was declining slightly during the Asian and early European trading sessions. Today, traders should focus on 2 critical reports at 1:30 p.m. UTC. First, Statistics Canada will publish the Gross Domestic Product (GDP) report, and the U.S. will release the Personal Consumption Expenditure (PCE) Price Index. The U.S. data tends to have a more sizeable impact on the market, and it may balance out any effect from the Canadian data. Overall, volatility in USDCAD could be quite substantial. The most bullish impact on USDCAD will be in case of weaker-than-expected Canadian GDP and higher-than-expected U.S. PCE data. Thus, USDCAD may move towards 1.36500. Conversely, strong Canadian GDP figures and lower U.S. inflation numbers will put substantial bearish pressure on the pair, and the mid-term bullish trend in USDCAD may reverse.