Canadian Dollar Update – Canadian dollar whip-sawed

• Opec boosts production by 547,000/bpd.
• Fed Governor resigns and Trump fires head of BLS.
• US dollar consolidating post-NFP losses.

USDCAD open 1.3803, overnight range 1.3764-1.3810, close 1.3780, WTI 65.47, Gold 3360.90

The Canadian dollar traded with a negative bias overnight. Markets are treating a 25 bp Fed rate cut in September as nearly guaranteed, which could nudge the cautious Bank of Canada to follow suit. Friday’s Canadian employment report (forecast 14,500) may provide further justification for easing.

WTI oil prices slid from $69.58 on Friday to an overnight low of $65.40 and hovered near $65.56 in New York. OPEC’s move to increase production by 547,000 barrels per day starting in September outweighed concerns that India might scale back purchases of Russian crude due to US tariff threats.

The market focus is on who Trump will name to replace Fed Governor Adriana Klugman who resigned Friday. Trump also needs to name a replacement for the head of the Bureau of Labor Statistics, who he fired on Friday.

Asian equity markets rallied led by Australia’s ASX 200 gain of 1.23%, while Japan’s Topix rose 0.70%.

European bourses are in the green. The German DAX is up 0.78%, and the FTSE 100 has gained 0.50%. S&P 500 futures are higher by 0.24%. Meanwhile, the US 10-year Treasury yield is holding steady at 4.220%, as of 8:00 am.

EURUSD traded in a 1.1530–1.1588 range, consolidating gains from Friday’s post-NFP rally. The Euro shrugged off slightly weaker Services PMI data (51.0 vs forecast 51.2), thanks to a better-than-expected Composite PMI reading of 50.6 (up from June’s 50.3).

GBPUSD traded in a 1.3260–1.3303 band, underpinned by broad US dollar weakness on rising Fed cut expectations. Solid UK PMI readings (Services at 51.5, Composite at 51.8) added a modest floor.

USDJPY traded in a 146.62–147.77 range and hovered near the top of that band during the New York session. USDJPY continues to suffer from a drop in the US 10-year Treasury yield from 4.41% pre-NFP to 4.212% today.

AUDUSD traded in a 0.6459–0.6480 range and is testing the upper end of that band in New York. The Aussie is benefitting from broad US dollar softness amid Fed cut bets. However, upside is capped by soft Australian growth data, receding inflation, and growing expectations of RBA easing. Services PMI rose to 54.1 in July from 53.8 in June, mildly supportive.

Canada and US trade data is on tap as is the US ISM Service PMI.