On Friday, we were surprised by very good data from the Canadian job market. However, this did not cause investors’ sympathy for the Canadian dollar. Meanwhile, the US dollar came under pressure due to weaker readings and the lack of a clear favorite in the presidential race.
The Dollar remains Strong Despite Data
Friday’s data from the US is mainly from the University of Michigan Index. On one hand, it turned out to be weaker than expected, by as much as 1.9 points, which is already a noticeable difference in these readings. On the other hand, it showed that the inflation expectations of the respondents are higher than the current inflation value. This means that there is room for greater price increases, which in turn raises questions about the pace of interest rate decline. The ongoing discussion is whether, in November, at the first meeting after the elections, the rates will stay at the same level. The chance of a pause in their reduction cycle in November is one of the reasons for the recent strengthening of the dollar against major currencies.
What About the US Elections?
Tracking elections in the US is no easy task. We have nationwide polls, but frankly speaking, they don’t tell us much. Voting is divided into specific states. As a result, it does not matter whether a given area wins by a little or a lot, as it still receives the pool of votes allocated to it. It is precisely for this reason – despite leading in nationwide polls – Kamala Harris is not considered a favorite. This can be seen, for example, in bookmaker websites, which pay less for a Donald Trump win than for Kamala Harris. This means that the election will once again come down to a few so-called “swing states”, i.e., states where victory balance can tilt to one side or the other until the very last moment. This means high volatility in the markets down the stretch.
Strong Data from Canada
Friday brought a package of good data from Canada. The market expected an unemployment increase from 6.6% to 6.7%. However, the reading was 6.5%, which was a pleasant surprise. Additionally, the change in employment was significantly higher than expected. To top it off, we have another important point. Part-time employment clearly dropped, while full-time employment increased. Therefore, not only is the overall amount of jobs growing, but people are also moving from part-time to full-time. It would seem that after such data, the Canadian dollar would strongly go up. However, one must remember that the Canadian currency has recently been under a lot of pressure. Therefore, despite the good data, it only managed to stop the fall of the Canadian dollar against the American one.
In the macroeconomic data calendar, there are no significant readings.
Maciej Przygórzewski – Chief analyst at InternetowyKantor.pl.
This article was initially published in CEO Magazine.
Source: https://ceo.com.pl/kanada-na-dobrej-sciezce-17928
