Loonie Falls as Unemployment Hits Post-Pandemic High

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3690-1.3940

Euro                 1.6100-1.6350

Sterling            1.8560-1.8810

WTI Oil (opening level) $62.85

The CAD/USD is opening at 1.3815 ( 0.7238 )

USDCAD ended Friday higher despite notable USD weakness elsewhere on a very weak Canadian jobs report for August that was released at the same time as the US report. The Net Change in Employment number for the month came in at -65.5k versus +5k expected and the Unemployment Rate shot up to 7.1% vs. 7.0% expected, a new post-pandemic high or the rate.

The US dollar sold off Friday on the weak August jobs report, as EURUSD rallied well clear of 1.1700 and above the range since late July of 1.1743, while USDJPY tested below 147.00 late Friday. But the news of Japan’s PM Ishiba stepping down brought a sharp sell-off in the JPY overnight, sending USDJPY back above 148.50 at one point overnight before the price action settled back toward 148.00.

Headlines

·    France’s Prime Minister Bayrou will face a confidence motion in the lower house today, one that he is widely expected to lose, throwing French politics into uncertainty again. President Macron says that he would rather appoint a new Prime Minister rather than hold new elections.

·    US non-farm payrolls showed the economy added just 22k jobs vs 75k expected in August and the unemployment rate rose to 4.3%. June's 14K previously revised print was again revised lower to –13K while July’s 73k figure was revised higher to 79k.

·    The Japanese yen fell, and stocks rose after PM Shigeru Ishiba resigned as LDP President following election losses that cost the coalition its majority. He has called for an emergency leadership vote and will stay on until a successor is chosen.

·    Japan annualized QoQ GDP for Q2 rose 2.2%, way above expectations of a 1% gain.

Key Points

·    Equities: Weak US finish on soft jobs while semis diverged; Europe slipped as exporters and banks lagged; Asia firm Friday with Hong Kong and China higher on PBoC liquidity

·    Volatility: VIX mid-teens, ETF hedging inflows, SPX move ±25 pts

·    Digital Assets: BTC ~$111k, ETH ~$4.3k, stablecoins on ETH record

·    Fixed Income: US yields hit new local lows Friday on weak jobs report

·    Currencies: USD weakness Friday partially eases as JPY weakness dominates to start the week on political turmoil in Japan

·    Commodities: Crude up on modest production increase. Gold holds near record