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Loonie Jumps Ahead of Dual Jobs Reports

Published July 7, 2016
  • Markets have calmed considerably overnight after a raucous few days that battered risk assets and the British Pound
  • Yields on benchmark US treasuries have risen ever so slightly following a remarkable decline to all time lows of 1.32% yesterday, while German yields are still in negative territory across much of the curve
  • Equities in Europe rose modestly and Canadian and US markets look set for slight gains at the open
  • The Canadian dollar is performing rather well since yesterday afternoon following an oil inventory report from the API which showed a larger than expected draw on crude stocks in the US
  • USDCAD is trading in the low 1.2900's this morning and oil is back above the 47$ handle for a gain of 1.25% thus far
  • The API data revealed a draw of 6.7M barrels last week, the seventh week of declines
  • A more widely followed inventory report from the US EIA is released this morning at 10:30am EST and the market is expecting to see a draw of -2.5M barrels
  • Note that inventories for refined products have been rising and are sitting well above their seasonal averages, a warning sign that consumer demand may not be the driving force behind the declines in crude stockpiles which will likely act as a cap on oil prices in the near to medium term all else being equal
  • The US reported that Jobless Claims fell dramatically last week to 254K – a good sign for US labour markets
  • As well, a private reading of payrolls released this morning from industry group ADP showed that hiring in the US rose by 172K in June, outpacing expectations for a 159K print
  • Both the US and Canada release official employment data on Friday
  • The US is forecasting a gain of 175K positions and the unemployment rate to rise to 4.8% from 4.7% in May (watch for movement in the participation rate to confirm the validity of the unemployment rate…)
  • Canada is expecting a gain of 5K jobs and the unemployment rate to rise to 7% from 6.9% in May
  • USDCAD could see some wide price action following the report so if you have near term needs now is the time to prepare with market bids 

Chart: USDCAD sideways consolidation continues.  As we approach the apex of the ascending triangle, there is risk of a topside breakout.