This week, the focus of the markets is shifting from American labor market issues to the situation in the Middle East, while the backdrop is improving data from Canada.
Stabilization of Expectations
After the volatile days surrounding last weekend, this one turned out to be boring. Just a week ago, the rates of major currencies and expectations concerning major interest rates were on a rollercoaster. We currently find ourselves in a new reality, where this year, we are supposed to see four interest rate cuts across the ocean. Now, we can see a return to the scenario where in September it will be a single 0.25% cut. Thus, we see a return to conservative scenarios. This is also evident in bonds, which are no longer being purchased so aggressively by investors. However, with the stabilization, we see some calming down on pairs with the Polish zloty, which has gained a bit after recent losses.
Middle East still Frightening
Just a week ago, a barrel of Brent crude in London cost $75 on the markets. It’s around $80 this Monday. In the crude oil market, escalating military actions in the Middle East have been strongly discussed. The talk is obviously about potential involvement from Israel, who, while not publicly claiming responsibility for the recent attack on a high-ranking official in Tehran, is widely associated with it. Given that peace talks are scheduled for Thursday in Cairo, it can be expected that there will be a response from Iran or one of the supported groups in the coming days. If the conflict escalates, it should also affect the oil market. How does it affect currencies? The more expensive oil will push up inflation and could potentially delay interest rate cuts.
Canadian Labor Market
Friday’s data from Canada were observed closely, following what we saw with the US. Here, however, nothing unexpected happened. The unemployment rate remained stable, against the market’s growing expectations, at 6.4%. It’s worth noting a decline in employment by 2.8 thousand jobs. But there’s a bright side to this news. The reduction results from a decrease of 64.4 thousand in the number of part-time jobs and an increase of 61.6 thousand in full-time employment. Seen from this perspective, Friday’s data have to be interpreted as favorable for the Canadian dollar. The Canadian currency’s strength against the US dollar was visibly after the report.
Today, there are no significant macroeconomic data scheduled.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl
Source: https://ceo.com.pl/kanada-zaskakuje-bliski-wschod-niepokoi-96674
