Expect barnburner gains in US employment this week
US Dollar: Weekly Trading Range (92.50 – 94.10)
Week ahead bias
92.50 – 94.10
1 month target
US Dollar Comment: In the US this week will be all about Job numbers. Based on the surplus of unfilled jobs and the downtrend in jobless claims, hiring is expected to be faster than consensus expectations for August despite economic growth showing signs of near-term deceleration. Analysts are also looking for a cooling in the ISM indicators, expecting more of the deceleration in services compared to subsequent month’s figures.
Non-Farm Payrolls - Hiring looks to have continued at a brisk pace in August, signalled by a further drop in jobless claims. Higher wages and recruitment efforts likely fuelled a net gain of 900K jobs. Job gains will again have been concentrated in services that have reopened. The lofty gain in jobs could cause the unemployment rate to fall to 5.2%. Most analysts expect barnburner gains in employment supporting the USD against G10FX.
Canadian Dollar: Weekly Trading Range (1.2575 -1.2825)
Week ahead bias
1 month target
Canadian Dollar Comment (Weekly range 1.2575 -1.2825): In Canada, the trade balance is likely to narrow but the attention will be on monthly and quarterly GDP reports. The fact that Q2 ended on a solid note helps set us up for that stronger Q3, July will also get a lift from reopening services during the summer’s trough in Covid-19.
GDP Data – Stricter restrictions during the third wave couldn’t hold back Canada’s economy. From April to June, GDP looks likely to have advanced at a 2 1⁄2% annualized pace. The housing market was again a star performer despite lockdowns in many parts of the country. Import data suggests that businesses were making up for lost time, buying more machinery and equipment during the period too. While spending on services was clearly held back in the second quarter, it would seem like households were able to find ways to make other purchases. A solid beginning to the quarter in July should set the stage for a robust Q3 for GDP. That said, with the fourth wave now here, it seems likely that growth this fall, and winter will be more subdued.
Current Account Data - For the first time in years, Canada’s current account moved back into surplus territory in Q1, and it seems like there’s a chance it remained there in the second quarter. Despite a weak showing for real exports during the period, nominal outbound shipments rose on the back of higher prices, particularly for energy products. The overall current account balance likely still eked out a slight $0.5bn surplus in Q2. The massive trade surplus seen in June wasn’t likely repeated in July, but the overall balance seems to have easily remained above water. The weakening Canadian dollar in July also would have made imports more expensive before affecting exports to the same extent. As a result, expect the trade surplus in July at $1.2bn.
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