- Loonie consolidating Friday’s losses
- EU Politics take a right turn.
- US dollar’s post NFP rally is intact.
USDCAD: open 1.3779, overnight range 1.3756-1.3779 close 1.3768, WTI $75.54, Gold, $2295.77.
The Canadian dollar may have survived Wednesday’s Bank of Canada rate cut, but it could not withstand the combined forces of robust US jobs data and poor Canadian employment numbers on Friday. USDCAD jumped from a low of 1.3663 on Friday to 1.3781 in early NY trading today.
Canada added 26,700 jobs in May, which at first glance is not bad. Unfortunately, they were all part-time, and the unemployment rate rose to 6.2% from 6.1%. Meanwhile, south of the border, the US gained 272,000 jobs, which far exceeded the 185,000 that was expected. The results eliminated any hope that the Fed would cut rates in July and lowered the odds for a September move as well. Bond traders were very unhappy, and by the end of the day, the 10-year Treasury yield had risen to close at 4.428% from a pre-data low of 4.281%.
Chinese and Australian markets were closed on Monday, and risk sentiment soured at the European open. The EU parliamentary elections resulted in a notable shift to the right. French President Emmanuel Macron’s party did so poorly he called a snap election. Germany’s Green party was thrashed in a message about overly aggressive climate change policies at the expense of jobs and secure energy.
European equity markets dropped sharply, led by a 1.58% plunge in the French CAC-40 index, while the German DAX index fell 0.52%. S&P 500 futures are off their worst levels and are down 0.8%.
EURUSD plunged from 1.0817 at Friday’s close to 1.0734 in NY trading. Traders were nervous due to the European parliament election results and the latest outlook for US monetary policy. The short-term EURUSD technicals suggest more losses toward 1.0700.
GBPUSD traded lower in a 1.2688-1.2734 range due to the risk that US rates remain unchanged for longer following Friday’s employment report. UK traders are also focused on the upcoming UK election.
USDJPY surged in the wake of the sharp rise in the US 10-year Treasury yield, but gains were contained after Japan’s GDP data showed the economy improved slightly (actual GDP -1.8% y/y vs forecast -1.9%, and previously 2.0%). The BoJ monetary policy meeting is Friday.
AUDUSD was uneventful in a 0.6576-0.6589 band because Australian markets were closed for a holiday.
The US and Canadian economic data calendar is empty.
