CAD Rebounds on Strong Job Data, USD Turning Weaker

Canadian Dollar rebound strongly in early US session after stronger than expected job data. Commodity currencies are also generally firm with European stocks and US futures, followed by Sterling. On the other hand, Yen, Swiss Franc and Dollar are turning softer, but Euro is not too far away. The question now is whether the risk markets would end the week on a strong note, setting up more selling in the greenback next week.

Technically, GBP/JPY’s break of 152.27 temporary top suggests resumption of rebound from 149.16 for 153.42 resistance. That’s another sign of Sterling strength. GBP/USD is now pressing 1.3890 resistance and break will also resume the rebound from 1.3601. Such development would double confirm underlying bullishness of the Pound.

In Europe, at the time of writing, FTSE is up 0.39%. DAX is up 0.40%. CAC is up 0.27%. Germany 10-year yield is up 0.013 at -0.347. Earlier in Asia, Nikkei rose 1.25%. Hong Kong HSI rose 1.91%. China Shanghai SSE rose 0.27%. Singapore Strait Times rose 0.88%. Japan 10-year JGB yield rose 0.0050 to 0.045.

Canada employment grew 90.2k in Aug, unemployment rate dropped to 7.1%

Canada Employment grew 90.2k in August, well above expectation of 67.2k. That’s the third consecutive monthly rise. Also, employment is within -0.8% of pre-pandemic level in February 2020. Job growth were concentrated in full-time work, which rose 69k. Unemployment rate dropped to 7.1%, down from 7.5%, better than expectation of 7.4%, lowest since February 2020 too.

US PPI rose 0.7% mom 8.3% yoy in Aug, record 12-month rise

US PPI for final demand rose 0.7% mom in August, above expectation of 0.6% mom. For the 12 months ended in August, PPI rose 8.3% yoy, accelerated from 7.8%, matched expectations. That’s the largest advance since 12-month date were first calculated in 2010.

PPI for final demand less foods, energy, and trade services rose 0.3% mom. For the 12 months, PPI rose 6.3% yoy, also the largest advance since the data was first calculated in 2014.

UK GDP grew just 0.1% mom in Jul, -2.1% below pre-pandemic level

UK GDP grew just 0.1% mom in July, below expectation of 0.5% mom. Overall, the economy remains -2.1% below its pre-pandemic level in February 2020. For the month, production output grew 1.2% mom while manufacturing was flat services was broadly flat, and construction was down -1.6% mom. Output in consumer-facing services dropped -0.3% mom, first decline since January. Also released good trade deficit widened slightly to GBP -12.7B in July, worse than expectation of GBP -10.9B

From Germany, CPI was finalized at 0.0% mom, 3.9% yoy in August. France industrial output rose 0.3% mom in July, versus expectation of 0.4% mom. Italy industrial output rose 0.8% mom in July, versus expectation of 0.1% mom.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 1.2614; (P) 1.2671; (R1) 1.2719; More…

USD/CAD’s fall from 1.2760 extends lower today but stays above 1.2492 support. Intraday bias remains neutral first. On the downside, break of 1.2492 will target 1.2421 key structural support next. Sustained break there should indicate completion of whole choppy rise form 1.2005. On the upside, above 1.2760 will bring retest of 1.2947 high instead.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). It should have completed after hitting 1.2061 (2017 low) and 50% retracement of 0.9406 to 1.4689 at 1.2048. Sustained break of 38.2% retracement of 1.4667 to 1.2005 at 1.3022 will pave the way to 61.8% retracement at 1.3650 and above. Overall, medium term outlook remains neutral at worst with 1.2048/61 support zone intact.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
06:00 GBP GDP M/M Jul 0.10% 0.50% 1.00%
06:00 GBP Index of Services 3M/3M Jul 4.50% 4.70% 5.70%
06:00 GBP Goods Trade Balance (GBP) Jul -12.7B -10.9B -12.0B
06:00 GBP Industrial Production Y/Y Jul 3.80% 9.40% 8.30%
06:00 GBP Industrial Production M/M Jul 1.20% 0.30% 0.70%
06:00 GBP Manufacturing Production M/M Jul 0.00% 0.10% 0.20%
06:00 GBP Manufacturing Production Y/Y Jul 6.00% 13.50% 13.90%
06:00 EUR Germany CPI M/M Aug F 0.00% 0.00% 0.00%
06:00 EUR Germany CPI Y/Y Aug F 3.90% 3.80% 3.90%
06:45 EUR France Industrial Output M/M Jul 0.30% 0.40% 0.50% 0.60%
08:00 EUR Italy Industrial Output M/M Jul 0.80% 0.10% 1.00% 1.10%
12:30 CAD Net Change in Employment Aug 90.2K 67.2K 94K
12:30 CAD Unemployment Rate Aug 7.10% 7.40% 7.50%
12:30 CAD Capacity Utilization Q2 82.00% 80.60% 81.70% 81.40%
12:30 USD PPI M/M Aug 0.70% 0.60% 1.00%
12:30 USD PPI Y/Y Aug 8.30% 8.30% 7.80%
12:30 USD PPI Core M/M Aug 0.60% 0.60% 1.00%
12:30 USD PPI Core Y/Y Aug 6.70% 6.60% 6.20%
14:00 USD Wholesale Inventories Jul F 0.60% 0.60%
14:00 GBP NIESR GDP Estimate 3.90%

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