The Canadian dollar has extended its losses for a third straight day. In the North American session, USD/CAD is trading at 1.3175, up 0.32%.
Canada’s Manufacturing PMI contracts
Canada’s Manufacturing PMI fell into negative territory in August, with a reading of 48.7, down from 52.5 in July. The market consensus stood at 53.6. This was the first contraction (a reading below 50.0) since June 2020, when the Covid pandemic hit the Canadian economy. The drivers behind the drop in new orders were a decrease in local and international demand and the uncertain economic climate. Manufacturing production declined for a second straight month, as supply-chain disruptions continue to hamper output. Consumers and businesses have been cutting back on purchases, as they grapple with rising inflation and interest rate hikes, which has dampened the demand for manufactured goods.
In the US, positive data today has boosted the US dollar against the major currencies. The ISM Manufacturing PMI for August remained steady at 52.8, above the market consensus of 52.0. This points to slight expansion. As well, unemployment claims fell to 232 thousand (vs 237 thousand last week), below the estimate of 248 thousand. This was the lowest level in two months, another indication that the labour market remains strong despite the slowing economy.
The week wraps up with US nonfarm payrolls on Friday. This key event could have a significant impact on the US dollar. The market consensus for August stands at 300 thousand new jobs. The July report was much stronger than expected, at 528 thousand. The upcoming nonfarm payrolls could play an important role in the Fed’s rate decision later this month. A print of 280k+ will provide support for a 75 basis point hike. Conversely, a lower reading would indicate that the labour market is weakening and would increase the likelihood of a 50bp increase.
- USD/CAD is testing resistance at 1.3167. Above, there is resistance at 1.3270
- There is support at 1.3102 and 1.3001
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Author: Kenny Fisher
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