The Canadian dollar continues to trade in a relatively subdued manner despite the broad bounce in the US dollar last week. Expectations of the Bank of Canada remaining one of the hawkish outliers in the G10 central bank space, which is generally pushing back market expectations, is helping support the loonie. Friday’s release of October’s labour market data is helping solidify the markets’ hawkish expectations as it highlighted limited slack in the labour market remains, with underlying wage pressures starting to build. This week, the data calendar is sparse for the loonie, with only the Bloomberg Nanos Confidence indicator for the week of November 5th scheduled.
The dollar gained ground ahead of October’s payrolls data on Friday as markets expected a strong payrolls report to follow September’s robust reading. The US labour market added 531,000 jobs last month, while September’s reading was upwardly revised to 312,000, leaving overall employment just 4.2m away from pre-pandemic levels. Following the release, the US 2Y Treasury yield climbed over 2bps on the day, widening front-end yield spreads while the dollar went bid across the G10 space. EURUSD reached a fresh 15-month low as German-US spreads widened, while GBPUSD was under even more pressure following the Bank of England’s dovish surprise on Thursday. While this week’s calendar is light in terms of central bank meetings, several Fed speakers are scheduled throughout the week. Today’s focus will be on Fed President Harker at 17:00 GMT who discusses the economic outlook at the Economic Club of New York, along with the Fed’s more dovish member Evans at 18:50 GMT. From the two, only Evans is a voter this year.
The euro was hit by a bout of USD strength on Friday ahead of crucial US jobs data but managed to hold above key support levels before the pair rebounded to reach daily highs. Price action has remained fairly muted since as investors gauge whether any Fed speakers this week will provide enough support for a stronger move. On the eurozone side, headlines around Russia’s gas exports to Europe remained in the picture as Russian President Putin promised Europe more gas starting today. His comments come after Russia was being suspected of keeping supplies capped in order to get the controversial Nord Stream 2 pipeline approved quicker. German gas orders via Russia signalled a very modest increase in shipments on Monday but still remain below Thursday’s levels and just about a fifth of normal levels, according to Gascade data. If no additional supply looks to be reaching Europe today, gas prices could see a further move up. On the calendar today is November’s Sentix investor confidence at 09:30 GMT ahead of tomorrow’s ZEW readings, but markets will also eye comments by European Central Bank’s Philip Lane at 13:10 and 14:00 GMT. On Wednesday, markets turn to US CPI inflation figures.
Sterling continues to sit under pressure this morning in a week that is unlikely to be too eventful. Positioning data, due to its lagged nature, is likely to show a bearish shift in GBP by leveraged funds last week following the dovish Bank of England meeting. The size of the shift in positioning could extend downside pressure on the pound, which is currently trading in the red for the third consecutive trading session this morning. This week, the focus is going to be very much on central bank commentary following the string of exciting central bank meetings, with Governor Bailey first up at the BoE at 17:00 GMT today. The Governor is set to speak at a citizens’ forum Q&A, where questioning is likely to focus on the Bank’s recent communication and its credibility. Beyond that, the data calendar is sparse today for GBP, leaving price action at the mercy of broader market developments.