The Canadian dollar is showing little movement in the Thursday session. Currently, USD/CAD is trading at 1.2849, down 0.13% on the day. In economic news, there are no Canadian events on the schedule. The US will release unemployment claims, which is expected to tick upwards to 235 thousand. Traders should be prepared for some movement from the pair on Friday, as the US and Canada release key employment numbers. As well, Canada releases Trade Balance and the US publishes ISM Non-Manufacturing PMI.
BoC Governor Stephen Poloz testified before a parliamentary committee this week, and his remarks did not exude confidence in the Canadian economy. Poloz said that the country is at a "crucial" spot in the economic cycle, noting concern over soft inflation and wage growth, and high household debt. Poloz said that the BoC will be cautious before raising interest rates. The markets are not expecting any moves before 2018, with the likelihood of a rate hike in December at just 21 percent. Canadian GDP declined in August, disappointing the markets. The decline of 0.1% was the first drop since October 2016. The soft reading extended the Canadian dollar’s misery, pushing USD/CAD above 1.29 and coming close to a 10-week low. The currency has endured a miserable October, slipping 3.5 percent.
As expected, the were no dramatic announcements from the Federal Reserve at the end of their policy meeting. The Fed indicated that a rate increase is very likely at the December meeting, and was careful not to change any of the wording in its statement regarding future rate hikes. The rate statement noted that hurricanes had caused a decline in payrolls in September, but the Fed did not expect the hurricanes to "materially alter the course of the national economy over the medium term." The markets appear in line with this sentiment, as the forecast for Friday’s nonfarm payrolls is a robust 311 thousand, after a dismal decline of 33 thousand in September.
The markets have priced in a December rate hike in the US at 96 percent, but what can we expect in 2018? This will depend to a large degree on the new chair of the Fed, who will take over from Janet Yellen in February. Janet Yellen will wind up her 3-year term in February, and she is not expected to be reappointed by President Trump. The front runner is economist Jerome Powell, who is expected to maintain the Fed’s current policy of small, incremental rates. Trump is expected to make his choice on Thursday, ahead of his trip to Asia.
