The Canadian dollar depreciated slightly on Monday as the U.S. dollar is still trending higher after the encouraging words from U.S. Federal Reserve Chair Janet Yellen at the Jackson Hole summit. Canadian data will be scarce all week with investors keeping their focus on U.S. employment data. The ADP payrolls on Wednesday and the main event the U.S. non farm payrolls (NFP) report on Friday will bring forth more data for the Fed to trigger another rate hike since December at the September FOMC meeting or push it back until the end of the year.
Personal spending in the United States came in line with expectations of a 0.3% gain and the PCE price index threw off limited inflation at 0.1 percent in July as reported by the Bureau of Economic Analysis on Monday morning. The market is awaiting the U.S. non farm payrolls (NFP) report on Friday to validate the view of Chair Yellen that on Friday said that: “I believe the case for an increase in the federal funds rate has strengthened in recent months”. Timing on the next move of the U.S. Federal Reserve is tricky. The U.S. central bank has missed excellent opportunities to hike in the past and is now facing a credibility crisis as it juggles the impact of its decision on the U.S. presidential elections and market volatility in general.
The USD/CAD gained 0.076 percent in the last 24 hours. The Canadian currency has depreciated against the U.S. dollar continuing the trend started on Friday after the release of U.S. Federal Reserve Chair Janet Yellen’s speech at the Jackson Hole summit. Although it is far from a guarantee the Fed did talk up the possibility of a rate hike in the Federal Open Market Committee (FOMC) meeting in September. As always the U.S. central bank was quick to add it will ultimately all depend on the economic data, but there is only a limited number of indicators big enough to move the needle. The biggest ones are the U.S. non farm payrolls (NFP) that is due on Friday, September 3 and the retail sales and inflation numbers to be released a week after.
West Texas lost 0.424 percent in the last 24 hours. The price of crude is trading at $46.55 in a volatile trading range that has seen the commodity bounce more than 2 percent. Crude Oil has suffered from the combined effects of a strong USD following the Fed’s comments and record high production levels from Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members alike.
Nigerian production seems to have shaken off disruptions to its production as rebels have pledged to stop the attacks against the oil industry. OPEC members in particular Iran have increased their output levels as a market share war intensifies as an oil glut overpowers demand for the black stuff. The oil output freeze talks that boosted the price of oil are still more than a month away and just like in March they could end up in disappointment. In the Doha summit the disagreement between Iran and Saudi Arabia led to the failure of the meeting between OPEC and non-OPEC producers. This time at even higher production levels the output deal is more likely as Iran is near pre-sanction levels, but it is still doubtful that a freeze at record high levels with little growth in demand to offset it would spark an oil rally at this stage.
Canadian data will hit the wire on Tuesday. The current account and the index of change in raw materials will both be published at 8:30 am EDT. Last time the current account surprised with a lower than expected deficit at 16.8 billion while the RMPI (Raw Materials Price Index) missed the forecast with a 1.8 percent gain. The CAD will be reacting to U.S. data for most of the week, but tomorrow it has the chance to react to domestic data ahead of the start of the U.S. employment data releases.
Market events to watch this week:
Tuesday, August 30
10:00am USD CB Consumer Confidence
Wednesday, August 31
8:15am USD ADP Non-Farm Employment Change
8:30am CAD GDP m/m
10:30am USD Crude Oil Inventories
9:00pm CNY Manufacturing PMI
9:30pm AUD Private Capital Expenditure q/q
9:30pm AUD Retail Sales m/m
9:45pm CNY Caixin Manufacturing PMI
Thursday, September 1
4:30am GBP Manufacturing PMI
8:30am USD Unemployment Claims
10:00am USD ISM Manufacturing PMI
Friday, September 2
4:30am GBP Construction PMI
8:30am CAD Trade Balance
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change
8:30am USD Unemployment Rate