Week Ahead – Dollar Slows Down After US Jobs Miss

The US dollar was mixed Friday. The greenback advanced against the commodity currencies (CAD, AUD AND NZD) edging higher against the CHF, but was lower agains the JPY and the EUR. The GBP deserves a special mention as positive Brexit rumours pushed it 0.61 percent higher against the USD. The American currency lost momentum as the U.S. non farm payrolls (NFP) headline jobs number disappointed with a 130,000 added positions, instead of the forecasted 188,000.

The USD was boosted by solid fundamentals that keep pricing in a fourth rate hike in 2018. The Columbus Day holiday in the United States will shorten the trading week. US inflation data points will be the highlights with US PPI on Wednesday October 10, and US CPI on Thursday October 11.

  • UK GDP to slowdown at 0.1 percent
  • US PPI forecasted to bounce back to 0.2%
  • US inflation steady at 0.2 percent

Dollar to Look for Inflationary Clues

The EUR/USD is flat on Friday ahead of the long weekend in the United States. The single currency is trading at 1.1514 awaiting a long weekend and a short trading week. The US currency was supported by Fed member speeches that continue to support a fourth rate hike in 2018.



The Fed raised rates on September 26 by a quarter of a percentage point and barring a sharp decline in economic indicators will do so again in December. The path for the US dollar for the end of the year will be unobstructed, but as 2018 begins to wrap up the strong dollar narrative is raising doubts.

In Europe Italian budget concerns once again rose despite the government conceding to lower budget deficits in 2020 and 2021. The budget concessions also came with lower growth forecasts that pressured the stock market and sent Italian yields higher. The EU is unlikely to accept the budget without further changes, but the political climate could further complicate things.

The EU could be fighting in two fronts. Brexit negotiations are ongoing, and despite some positive signs, are nowhere near an agreement. Opening another front by shooting down the Italian budget could be a replay of the Greek drama in 2010 but at a much larger scale.

Loonie Falls Despite US Jobs Report Miss

The Canadian dollar fell against the US dollar on Friday despite a rebound in Canadian employment numbers and a miss in their American counterparts.

The loonie did advance against the greenback when the NFP report and the Canadian employment numbers were announced but as traders looked ahead to the long weekend they reduced their short US dollar exposures.


Canadian dollar weekly graph October 1, 2018

Canada added 63,300 positions in September driven by part time employment. The gain offset last month’s losses of 54,100 jobs that were also part time positions. The Bank of Canada (BoC) will have another solid datapoint to validate its upcoming monetary policy meeting that is being priced in at 85 percent probability of a rate hike.

The Canadian dollar is on track to end 0.29 percent lower versus the US dollar. Despite the headline jobs miss on the NFP report, the revisions and more importantly the inflation components still support a Fed rate hike in December. The CME’s FedWatch tool shows a 81.7 percent probability, down slightly from 83.3 percent yesterday.

Gold Higher on Dollar Stumble

Gold rose on Friday taking advantage of a miss on the monthly U.S. non farm payrolls (NFP) report. The US economy added 130,000 jobs with market forecasts near 200,000 positions added in September.

The yellow metal rose as the market digested the jobs report miss and put the US dollar under pressure.

Gold will hold on to weekly gains but as a long weekend approaches due to the Columbus Day holiday investors will trim their dollar short exposure limiting the upside for commodities.



The weakest US jobs report this year took a toll on the US dollar. The headline miss was only part of the story, wages grew as much as expected and while the lower numbers this month do not raise questions on a December rate lift by the Fed it does affect the intensity of the market focus on next week’s inflation indicators.

Oil Higher until OPEC-Russia Confirm Production Increase

West Texas Intermediate is rising 0.55 percent on Friday, with Brent making a smaller upwards move at 0.05 percent. Question marks about how and when will energy producers increase production to cover the supply fallout from the official start of US sanctions against Iran.

The sanctions start on November 4, but already Iranian exports have fallen given how the US communicated that it would not tolerate any cooperation.

The Trump administration has called out the OPEC for not doing enough to keep crude prices low, but ironically it’s the sanctions imposed by the administration that have put oil prices higher.



On a weekly basis WTI and Brent have advanced ore than 2 percent as US Secretary Rick Perry has taken off the table the option to use the emergency oil reserves to bring prices down.

Reports circulated that Russia and Saudi Arabia are ready to increase oil production, but if they have agreed they said nothing after the OPEC met with major producers on September 23 in Algiers.

Oil prices will continue to fluctuate upwards until there are confirmations that energy producers are ready to offset the lost supply from Iran.

The weekly crude inventories report will be published on Thursday at 11:00 am EDT due to the Columbus Day holiday in the states.

Market events to watch this week:

Wednesday, October 10
4:30am GBP GDP m/m
8:30am USD PPI m/m
Thursday, October 11
7:30am EUR ECB Monetary Policy Meeting Accounts
8:30am USD CPI m/m
11:00am USD Crude Oil Inventories
Friday, October 12
10:00am USD Prelim UoM Consumer Sentiment

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

Strong Dollar Awaits Jobs Report to Validate Further Fed Hikes

The US dollar is mixed against major pairs on Friday. The dollar gained against the JPY, EUR, GBP and CHF but depreciated against the commodity pairs (CAD, AUD and NZD).

Fundamental data in the US supported the dollar: the Fed delivered its anticipated third rate hike of 2018, the final GDP for the second quarter was 4.2 percent. Fed Chair Powell’s speech and press conference after the FOMC was a big factor in the rise of the dollar after the market had already priced in the 25 basis points lift to interest rates. Mr Powell will speak next week on Tuesday, October 2nd on the topic of employment and inflation. This will officially kick off jobs week in the US.

The main event will be the release of the biggest economic indicator on Friday, October 5 at 8:30 am when the U.S. non farm payrolls (NFP) is published.

  • US manufacturing and service PMIs could signal growth slowdown
  • UK leading indicators expected to remain flat
  • US NFP report to show economy added 190,000 jobs

Euro Hit by Political Turmoil and Inflation Softness

The EUR/USD lost 0.26 percent on Friday. The single currency is trading at 1.1610 and accumulated 1.16 percent in losses during the week. A higher than predicted Italian budget for 2019 at 2.4 percent and softer core inflation in the eurozone put downward pressure on the currency.



European stock markets were hit by the news as political turmoil once again threatens the European Union.

The other shoe dropped when inflation slowed down in the Eurozone in the same week that the U.S. Federal Reserve hiked rates and was optimistic about economic growth in the US.

The monetary policy divergence between the Fed and other major central banks was clear this week as fundamentals back the US policy makers, while questions remain on how effective other policy makers around the world have been.

Loonie Rises as GDP Data Validates October Rate Hike

The Canadian dollar rose on Friday after the monthly gross domestic product (GDP) beat the forecast with a 0.2 percent gain. The loonie is up almost 1 percent on the final day of the trading week. The currency is still showing a weekly loss against the greenback as NAFTA uncertainty and the U.S. Federal Reserve rate announcement put downward pressure.

The rise today comes with higher expectations of a Canadian interest rate lift in October. The Bank of Canada (BoC) held rates in September ahead of a highly anticipated Fed rate hike in September that came to pass. The US central bank has forecasted another rate hike in 2018 and 2 or 3 more next year as part of its economic projections published Wednesday.


usdcad Canadian dollar graph, September 28, 2018

BoC Governor Stephen Poloz spoke on Thursday addressing the rising inflation and Friday’s GDP data point puts a rate hike firmly on the table in the short term.

NAFTA negotiations have not made big inroads as the US met with Canada with the goal of turning two bilateral agreements into a trilateral one.

With a considerable amount of work still to be done in bridging the gap between US and Canada, the US-Mexico agreement will be published tonight with a possibility of leaving the door open for Canada to join.

It is that possibility that has kept the loonie gaining despite the NAFTA train moving without Canada.

Crude Surges as Supply Concerns Push Prices to 4 Year Highs

Oil prices surged on Friday as supply concerns took crude to four year highs. The news that China is cutting back on Iranian oil purchases triggered a rally where Brent and WTI had a 1.40 percent one-day gain. Brent is on track to a 5.34 percent gain during the week with WTI clocking in at 3.66 percent.

The US sanctions against Iran don’t kick into effect until November, but the harsh penalties threatened against those who do have made Iranian crude purchases drop.


West Texas Intermediate graph

China’s Sinopec Corp is slashing its loadings in half to avoid the wrath of Washington. In August Sinopec planned to offer Tehran a lifeline by circumventing the sanctions as it reduced US oil purchases due to the rising trade turmoil between the US and China.

The decision by the Chinese state owned energy company will deal a huge blow to Iran as China is its biggest customer.


West Texas Intermediate graph

The shortfall from Iranian crude sales does not have a short term solution after US Energy Secretary Rick Perry said earlier this week that the US would not tap into its emergency crude reserves to bring prices down.

US President Donald Trump had implied during his UN General Assembly speech that unless the OPEC increase production levels America’s would utilize its position as the largest energy producer in the world.

Gold Gains But US Dollar to Limit Recovery

Gold rose 0.67 percent on Friday but the strength of the US dollar after the U.S. Federal Reserve lifted interest rates this week proved to be too much for the yellow metal that will end up losing 0.49 percent on a weekly basis.

The Fed raised the benchmark rate by 25 basis points and the futures market is pricing in a 78.5 percent probability of a lift in December. Gold traders will look ahead at next week’s manufacturing and service PMIs for more guidance as the US economy continues to grow. Friday’s U.S. non farm payrolls (NFP) will be the final test of the yellow metal.



The US is expected to add 190,000 jobs with average hourly earning rising 0.3 percent. Higher inflation expectations validate the Fed’s forecasts and the market is pricing in a rate hike in December and follow ups in 2019.

Market events to watch this week:

Monday, October 1
4:30am GBP Manufacturing PMI
10:00am USD ISM Manufacturing PMI
Tuesday, October 2
12:30am AUD Cash Rate
12:30am AUD RBA Rate Statement
4:30am GBP Construction PMI
12:45pm USD Fed Chair Powell Speaks
Wednesday, October 3
4:30am GBP Services PMI
8:15am USD ADP Non-Farm Employment Change
10:00am USD ISM Non-Manufacturing PMI
10:30am USD Crude Oil Inventories
Thursday, October 4
9:30pm AUD Retail Sales m/m
Friday, October 5
8:30am CAD Employment Change
8:30am CAD Trade Balance
8:30am USD Average Hourly Earnings m/m
8:30am USD Non-Farm Employment Change

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

USD/CAD Canadian Dollar Rises as GDP Data Validates October Rate Hike

The Canadian dollar rose on Friday after the monthly gross domestic product (GDP) beat the forecast with a 0.2 percent gain. The loonie is up almost 1 percent on the final day of the trading week. The currency is still showing a weekly loss against the greenback as NAFTA uncertainty and the U.S. Federal Reserve rate announcement put downward pressure.

The rise today comes with higher expectations of a Canadian interest rate lift in October. The Bank of Canada (BoC) held rates in September ahead of a highly anticipated Fed rate hike in September that came to pass. The US central bank has forecasted another rate hike in 2018 and 2 or 3 more next year as part of its economic projections published Wednesday.

BoC Governor Stephen Poloz spoke on Thursday addressing the rising inflation and Friday’s GDP data point puts a rate hike firmly on the table in the short term.


usdcad Canadian dollar graph, September 28, 2018

NAFTA negotiations have not made big inroads as the US met with Canada with the goal of turning two bilateral agreements into a trilateral one.

With a considerable amount of work still to be done in bridging the gap between US and Canada, the US-Mexico agreement will be published tonight with a possibility of leaving the door open for Canada to join.

It is that possibility that has kept the loonie gaining despite the NAFTA train moving without Canada.

Gold Falls After US GDP Confirms Strong Pace of Growth

Gold prices are lower on Thursday a day after the U.S. Federal Reserve hiked its benchmark interest rate as anticipated. The central bank has lifted rates three times in 2018 and is on track to do so once more at the end of its December monetary policy meeting.

Investors were focused on the words from Chair Jerome Powell. The Fed chief did not deviate from the script that other Fed members have stuck to. The central bank is data dependant and will act when needed. Despite questions on trade turmoil, he dismissed the topic as not part of the responsibility of the Federal Reserve.



The Fed has been the target of the Trump administration for hiking rates, but questions from the financial press on the subject were an opportunity for Powell to make clear the Fed is independent from the White House.

The rate hike was already priced, but a hawkish statement was balanced with some dovish projections. Powell’s style of communication did also support a rise in the dollar even though the market was expecting the monetary policy move. Jerome Powell uses a more direct and conversational tone when addressing the press without falling into the traditional economic theory answers.

The release of the final US GDP for the second quarter put downward pressure on the yellow metal. The pace of growth was confirmed as strong in the US and validates the more hawkish views within the Federal Open Market Committee (FOMC).

Trade Tensions Return as US Tariffs on China Lift Dollar

The dollar bounced back on Friday, after a couple of economic indicator misses this week, the greenback is higher against all major pairs. Major pairs and commodities are lower against the greenback ahead of the weekend. The American currency did not manage to overturn the losses posted during the rest of the week. On a weekly basis the USD is lower against all majors except the Japanese Yen.

A slowdown in the pace of inflation, miss in retail sales expectations and a softer tone on trade from the Trump administration were the three major factors for the softness of the currency.

Rate differentials also helping the USD. This week was mostly a non event for the Bank of England (BoE) and the European Central Bank (ECB). Although the Sept rate hike by the Fed is priced in, it also shows its the only economy with some momentum to even lift rates. Next up in the economic calendar are the Bank of Japan (BOJ) and the Swiss National Bank that are not expected to modify their monetary policies.

Euro Scored a Win on a Weekly Basis but Falls as Trade Tensions Rise

The escalation of trade tensions was a positive for the US dollar as investors sought a safe haven during times of uncertainty. As potential olive branches are put forward there is optimism that Canada will join the US-Mexico agreement and talks with China could lead to closing the gap between the two points of view on trade. US President Trump tweeted on Friday that the a meeting with China is no guarantee of anything and reports in the media suggest the $200 billion US tariffs are still on the table.

A September rate hike is still fully priced in, but the inflation and retail sales miss did slim down the probabilities of a follow up rate hike in December.

The American economic calendar is short on blockbuster releases with Washington development to guide markets as trade tensions have eased, but are far from resolved.



The euro rose almost 1 percent this week with risk appetite returning to markets and strong wage growth in Europe. The European Central Bank (ECB) did as expected and held rates signalling that it will end its QE program at the end of the year and continued to maintain interest rates low through the 2019 summer.

Investors were not given any new information and instead bought the currency on improved international trade environment. The olive branches are just now entering the picture, and ECB economists could not have predicted the timing as they also announced a downgrade of their economic projections, citing trade worries.

Upcoming European inflation along with service and manufacturing PMIs will bookend the economic calendar in the EU. The gap between interest rates will continue to grow as the U.S. Federal Reserve pushes on its tightening policies as growth fails to spark momentum in Europe.

Fed rate hikes are priced in into the USD, but signs of European slowdown or the US economy hitting a higher gear could be a gift for dollar bulls.

Canadian Dollar Awaits News on NAFTA as US Gets Tough on China

The Canadian dollar fell on Friday. After the Trump administration softened its stance on international trade, in particular by reopening trade talks with China, NAFTA optimism boosted the loonie. Traders did not feel confident in carrying over short dollar positions into the weekend and the greenback saw a recovery on Friday.


Canadian dollar weekly graph September 10, 2018

The loonie advanced 1 percent during the week and next week’s inflation and retail sales data on Friday are crucial for the fate of a Bank of Canada (BoC) interest rate hike. NAFTA headlines will roll in as the team of negotiations get back to work with the aim to add Canada to to US-Mexico agreement.

Expectations are mixed on NAFTA, as Canada seems ready to make concessions on dairy but the US and Mexico continue to press for a trilateral deal while also adding they are ready to forge ahead if its only a bilateral one.

China Tariffs Cap Rise of Oil as Growth Concerns Hit Commodities

Oil fell 0.35 percent on Friday compounding on losses seen on Thursday, but will head into the weekend with a 1.09 percent gain. Supply disruptions have lifted prices after the 2014, be it the Organization of the Petroleum Exporting Countries (OPEC) and major producers agreement to limit their output to weather and geopolitical disputes.

Hurricane Florence in the US was downgraded and with it the negative short term effect on potential disruptions. IEA reported today that OPEC is starting to ramp up production by 420,000 daily barrels more than making up for the impact that the sanctions on Iranian exports will have on supply.

Global demand for crude has not shown signs of recovery and if producers start pumping there is a risk that oversupply could once again bring instability to oil prices.

Geopolitical factors like the US-China trade tensions will continue to put downward pressure on crude prices as higher levels of protectionist measures tend to slow down global growth.

Yellow Metal Falls as Risk Aversion and Fed Rate Hikes Advance

Gold fell 0.46 on Friday after a bounce in the US dollar at the end of the week. Risk aversion has been the main dollar of US strength as trade war concerns could have a deep impact in global growth. Commodities have recovered this week after the Trump administration has softened its tough stance with China with bilateral talks to restart in a couple of weeks.



Friday’s move is also explained by investors limiting their exposures as the weekend approaches, given that geopolitical risk could rise at any moment. The move gave some breathing room to the greenback as it is on its way to erase the majority of its losses against the yellow metal.

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The USD/CAD gained 1.01 percent in the first week of September. The currency pair traded at 1.3173 on Friday after a tale of two reports put downward pressure on the loonie.

The Canadian and US jobs reports were published on Friday at the same time.

While the US economy added 201,000 and saw wage growth.


usdcad Canadian dollar graph, September 11, 2018

The Canadian economy lost 51,600 jobs in August and the unemployment rate rose to 6 percent.

The Canadian dollar was on the back foot most of the week given the uncertain future of the US-Canada trade negotiations.

The silver lining came on Thursday after Bank of Canada (BoC) Deputy Governor Carolyn Wilkins said that a breakdown in the US-Canada trade talks would not keep the central bank from raising interest rates.

OANDA Market Beat Risk Aversion Boosts Dollar

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The US dollar appreciated versus most major pairs on Friday. The Japanese yen outperformed the greenback as a safe haven, but all other major currencies suffered heavy losses during the week. Tense trade developments between China and the US and Friday’s drop in the Turkish lira dragged emerging and developed markets lower as US sanctions were doubled. Geopolitics drowned out most of the impact of economic releases with US inflation hitting a new high and Canadian part time jobs driving a drop in the unemployment rate.

– Turkish lira fell more than 20 percent in a week
– US retail sales to remain subdued
– UK retail sales to show more evidence of solid summer

Dollar Higher as Risk Appetite Vanishes

The US dollar appreciated versus most major pairs on Friday. The Japanese yen outperformed the greenback as a safe haven, but all other major currencies suffered heavy losses during the week. Tense trade developments between China and the US and Friday’s drop in the Turkish lira dragged emerging and developed markets lower as US sanctions were doubled. Geopolitics drowned out most of the impact of economic releases with US inflation hitting a new high and Canadian part time jobs driving a drop in the unemployment rate.

  • Turkish lira fell more than 20 percent in a week
  • US retail sales to remain subdued
  • UK retail sales to show more evidence of solid summer

European Bank Exposure to Turkey Hits EUR

The EUR/USD lost 1.2 percent in the last five days. The single currency is trading at 1.1398, with the pair looking to fall further after breaking through the 1.14 barrier. The economic calendar does not feature major events in Europe and with current geopolitical tension the single currency remains vulnerable against the safe haven dollar.



US inflation is 2.94 percent, and with core inflation is back to 2008 levels at 2.4 percent the case for two more rate hikes by the U.S. Federal Reserve this year remains strong. The monetary policy divergence between the European Central Bank (ECB) and the U.S. Federal Reserve has been a factor, but remains in the background as geopolitical forces have proven to have a bigger impact in 2018.

Italian, Spanish and French banks are reported to have loans worth $150 billion in Turkey. The falling Turkish lira will make those loans denominated in foreign currency harder to repay which is why the EUR has touched record lows on Friday. The European stock market has already witnessed a sell off of financial institutions.

Turkey President Erdogan was defiant and called for the population to defend the currency by selling their US dollars and gold holdings instead of trying to open a dialogue with the US regarding steel tariffs.

Loonie Grounded Despite Strong Jobs Report

The USD/CAD gained 0.77 percent during the week. The Canadian dollar is lower on Friday. The USD/CAD is trading at 1.3145. Statistics Canada released a stronger than expected employment report with a huge gain of 54,100 jobs driving the unemployment rate down to 5.8 percent in July. The loonie failed to gain momentum from that economic indicator release given the current geopolitical climate.


Canadian dollar weekly graph August 6, 2018

A flight to safety from investors has given a boost to traditional safe havens like the JPY, CHF, USD and gold. The Turkish lira has been in free fall and has triggered contagion fears as Spain, Italy and France have high exposures.

The strong jobs report adds to the probability the Bank of Canada (BoC) will hike the benchmark interest rate one more time in 2018. The BoC raised its overnight target rate to 1.50 percent on July 11 with the growth of the economy picking up for a follow up rate hike in October.

The Canadian currency was lifted by the solid jobs report, but not enough to send the loonie into the black on Friday. The indicator comes during a tense trading environment where risk appetite is subdued. 

Pound Lower on Brexit Despite Strong GDP Numbers

The GBP/USD lost 1.64 percent in the last five days. The currency pair is trading at 1.2755 near a one year low after no deal Brexit probabilities rose. The divorce negotiations between the UK and the EU have been short on positives with an 8 month period to sort out a lot of tough negotiations.



The market has priced in the scenario of the UK exiting the single market with no trade deal in place. The ball is back on the government of Theresa May to come up with a package that not only satisfies supporters at home, but more importantly is acceptable for the EU. So far that balancing act has not been achieved and has put the leadership of Theresa May into question with an almost imminent vote of confidence in the near term.

The decision of the Bank of England (BoE) to lift rates last week was unanimous, but it could end up being the only pro-active decision by the central bank in 2018 as it heads into reactive territory.

Yen Keeps Up With Dollar in Turbulent Times

The USD/JPY lost 0.51 percent during the last five trading sessions. The currency pair is trading at 110.59. The Japanese currency has appreciated but it has done so less than other times of uncertainty in the market. The use of economic sanctions by the Trump administration was a recurring theme this week causing high volatility in emerging markets.



The JPY continues to trade in a tight range despite the global uncertainty but the safe haven appeal of the currency has set it apart from other Asian currencies that have depreciated as trade war concerns rise.

Market events to watch this week:

Tuesday, August 14
4:30am GBP Average Earnings Index 3m/y
9:30pm AUD Wage Price Index q/q
Wednesday, August 15
4:30am GBP CPI y/y
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m
10:30am USD Crude Oil Inventories
9:30pm AUD Employment Change
Thursday, August 16
4:30am GBP Retail Sales m/m
8:30am USD Building Permits
7:30pm AUD RBA Gov Lowe Speaks
Friday, August 17
8:30am CAD CPI m/m

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

US Dollar Takes NFP Hit But Ends Up Higher on the Week

The US dollar fell on Friday after the U.S. non farm payrolls (NFP) came in below expectations with only a gain of 157,000 but otherwise the unemployment rate dropped to 3.9 percent and wage growth remained unchanged at 0.3 percent. The greenback is still higher against most majors on a weekly basis. The past five trading days featured central banks and influential economic indicators, but the guiding factor remains the trade tensions between China and the United States. On Friday China announced its preparing new tariffs on $60 billion US goods as retaliation on the ongoing trade spat. The week that kicks off on August 6 will be more subdued from the economic calendar with the central banks of Australia and New Zealand publishing their officials rates. The UK’s gross domestic product, Canadian jobs data and US inflation will wrap up the week on Friday, August 10.

  • RBA and RBNZ expected to keep rates unchanged
  • UK quarterly GDP forecasted to gain 0.4 percent
  • US inflation advancing at 0.2 percent

Dollar Rises Guided by Geopolitics

The EUR/USD lost 0.61 percent in the last five days. The single currency is trading at 1.1582 after the EUR rose 0.10 percent on Friday but is far from recouping the gains of the USD during the week. The euro rose on a tight rangebound session despite overcoming weak retail sales and was helped by the lower than expected jobs report. The currency pair was mostly guided by geopolitics and the U.S. Federal Reserve meeting on Wednesday. Trade tensions have escalated on the US-China front with the US central bank staying put on rates, but giving an optimistic view on the economy.



The US central bank is expected to continue with its plans to lift interest rates two more times in 2018. The jobs report brought less jobs than expected but still managed to add enough jobs to bring the unemployment rate down to 3.9 percent. There are concerns that the employment numbers will take a hit as trade war decisions trickle down but for now the outlook for American jobs is solid.

Inflation pressures remains low as despite a lower unemployment and high participation rate wages have not caught up to other costs. Labour shortages have not been widespread enough to trigger an above inflation rise in pay.

The positive employment data and the impressive growth of the economy in the second quarter validate the Fed’s decision to raise rates twice so far in 2018 and to continue on the path for two more rate hikes. The CME FedWatch tool shows a 93.6 percent of a chance of a hike in September 26.

The week of August 6 to August 10 will not bring the same economic calendar fireworks compared to the first week of the month. The highlights will be the Reserve Bank of New Zealand (RBNZ) and the Reserve Bank of Australia (RBA) with rate announcements that will likely end up with no change leaving investors to look for words from central bankers and monetary policy language for guidance.

The consumer price index on Friday will shed more light on inflation in America.

BoE Dovish Hike Sinks Pound

The GBP/USD fell 0.79 percent during the week. Cable is trading at 1.3004 wit the pound rising slightly on Friday. The Bank of England (BoE) hiked its benchmark rate on Super Thursday, but it was the cautionary words of BoE Governor Mark Carney that ultimately took the currency lower. The actions of the central bank were hawkish, by delivering the second rate hikes since the crisis, but Brexit looms over the monetary policy decision as hard Brexit scenarios have increased in probability.



The decision of the Bank of England (BoE) was unanimous, but given the fragile state of Prime Minister May’s leadership as she heads into the final 8 months of Brexit negotiations, it could end up being the only pro-active decision by the central bank in 2018 as it heads into reactive territory.

Loonie Higher on Strong Data and NAFTA Hope

The USD/CAD lost 0.58 percent during the week. The currency pair is trading at 1.2983 after strong Canadian trade data added more arguments for a Bank of Canada (BoC) rate hike. Canada’s deficit shrunk to $626 million in June. The monthly GDP numbers released on Tuesday by beating estimates with a 0.5 percent gain.


Canadian dollar weekly graph July 30, 2018

The Bank of Canada (BoC) lifted interest rates by 25 basis points on July 11 and a strong GDP report and a narrower trade deficit the probability of a follow up in 2018 has risen. Bank of Nova Scotia is forecasting 2 more rate hikes despite the uncertain outcome on NAFTA. The BoC will try to keep the gap between the Fed funds rate and the Canadian rate as much as the economy will allow. The U.S. Federal Reserve is expected to hike in September and again in December to deliver the promised four interest rate hikes in their path to normalization.

Mexican Peso Rose as US Jobs Missed Expectations

The USD/MXN depreciated on a weekly basis and is trading at 18.5574 on Friday afternoon. The currency pair had a volatile week trading in a tight range. The highest point came as trade fears triggered a flight to safety in which investors bought dollars. The talks on Thursday and Friday between US and Mexican negotiators are keeping NAFTA hope alive and with he soft employment numbers in the US the MXN appreciated.



NAFTA negotiations have advanced in recent weeks as the newly elected Mexican president has been optimistic a quick deal can be reached. Mexican Trade teams are in Washington to talk with the US Trade representative, but the US did not extend an invitation to Canada to join the meetings.

The US team is sticking to the sunset cause and the auto content but there is more willingness to negotiate in bilateral terms, although Mexico has made it clear that it won’t negotiate without Canada being present.

Market events to watch this week:

Tuesday, August 7
12:30am AUD RBA Rate Statement
11:00pm NZD Inflation Expectations q/q
11:05pm AUD RBA Gov Lowe Speaks
Wednesday, August 8
10:30am USD Crude Oil Inventories
5:00pm NZD Official Cash Rate
6:00pm NZD RBNZ Press Conference
Thursday, August 9
8:30am USD PPI m/m
9:30pm AUD RBA Monetary Policy Statement
Friday, August 10
4:30am GBP GDP m/m
4:30am GBP Manufacturing Production m/m
4:30am BP Prelim GDP q/q
8:30am CAD Employment Change
8:30am CAD Unemployment Rate
8:30am USD CPI m/m
8:30am USD Core CPI m/m

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

Dollar Higher Ahead of Fed Meeting OANDA Market Beat Podcast

OANDA Senior Market Analyst Alfonso Esparza reviews the major upcoming market news, macro analysis and economic indicator releases that will impact currencies, stocks other asset classes. Joining him this week is OANDA’s Vice President of Research Dean Popplewell

Subscription available on iTunes https://goo.gl/TZEWRW and GooglePlay https://goo.gl/cRBk39. Tune in every Tuesday and don’t miss a beat as we cover the hottest trends impacting the markets in the week ahead. Trading is high risk. Losses can exceed investment.