USD/CAD flatlines right above 1.4000 with US, Canadian data on tap

Guillermo Alcala FXStreet

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The US Dollar consolidates gains above 1.4000, on track to close a three-week rally.
Political uncertainty in Japan and France has been boosting the US Dollar across the board this week
The Canadian Dollar suffers with Oil prices near the $60.00 level.

The US Dollar is standing comfortably at six-month highs above 1.4000 against the Canadian Dollar. The pair has been trading higher for the last three weeks, before taking some rest ahead of the release of US consumer confidence data and Canada’s employment figures.

The US Dollar has been the strongest performer this week, supported by the political uncertainty in France and Japan. The Canadian Dollar, on the contrary, has been under pressure as the trade deal between Israel and Hamas sent Oil prices tumbling.

Fed's Daly calls for further rate cuts

Earlier on Friday, San Francisco Fed President Mary Daly added some pressure on the US Dollar, anticipating further rate cuts in the coming months. Daly pointed out a “worrisome” deterioration of the labour market, while inflation, in her opinion, has come much less than feared.

Investors, however, are taking a cautious approach on Friday, awaiting Canada’s employment report. The market consensus anticipates a 5K increase in net employment in September after a 65.5K decline in August. The unemployment rate, however, is expected to have ticked up to 7.2% from 7.1% in the previous month.

Later on, the US Michigan Consumer Sentiment Index is expected to show that confidence among American consumers fell further in October, amid worsening labour market conditions. The index is expected to have dropped to 54.2 from September’s 55.1, and is likely to provide further reasons for the Fed’s dove party.

(This story was corrected on October 10 at 10:35 GMT to say that the USD/CAD flatlines right above 1.4000, and not 140 as previously reported)

Economic Indicator

Net Change in Employment

The Net Change in Employment released by Statistics Canada is a measure of the change in the number of people in employment in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending and indicates economic growth. Therefore, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

Why it matters to traders?

Canada’s labor market statistics tend to have a significant impact on the Canadian dollar, with the Employment Change figure carrying most of the weight. There is a significant correlation between the amount of people working and consumption, which impacts inflation and the Bank of Canada’s rate decisions, in turn moving the C$. Actual figures beating consensus tend to be CAD bullish, with currency markets usually reacting steadily and consistently in response to the publication.

Economic Indicator

Michigan Consumer Sentiment Index

The Michigan Consumer Sentiment Index, released on a monthly basis by the University of Michigan, is a survey gauging sentiment among consumers in the United States. The questions cover three broad areas: personal finances, business conditions and buying conditions. The data shows a picture of whether or not consumers are willing to spend money, a key factor as consumer spending is a major driver of the US economy. The University of Michigan survey has proven to be an accurate indicator of the future course of the US economy. The survey publishes a preliminary, mid-month reading and a final print at the end of the month. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

Consumer exuberance can translate into greater spending and faster economic growth, implying a stronger labor market and a potential pick-up in inflation, helping turn the Fed hawkish. This survey’s popularity among analysts (mentioned more frequently than CB Consumer Confidence) is justified because the data here includes interviews conducted up to a day or two before the official release, making it a timely measure of consumer mood, but foremost because it gauges consumer attitudes on financial and income situations. Actual figures beating consensus tend to be USD bullish.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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