By Ben Robson
There seems to never be a dull moment in the US, either with the current president, his nominations for high ranking office, or with one of the many intriguing characters leading some of America’s biggest technology companies. Donald Trump took a step back from center-stage last week as his Supreme Court Judge nomination Brett Kavanaugh vigorously defended sexual misconduct allegations, and more pointedly for the financial markets, the US Securities and Exchange Commission announced on Thursday that it was suing Tesla CEO Elon Musk for securities fraud over remarks he made on Twitter in August that he was taking his company private. Over the weekend it appears a settlement has been reached between Tesla, its CEO and the SEC that involves a hefty $40 million fine and Musk relinquishing his role as Chairman of Tesla. Musk will remain as CEO.
So, we start October, a traditionally volatile month, with a raft of timely US data announcements and other important announcements from both Canada and Australia. In the UK, Boris Johnson has not refused to rule out a challenge to try and oust UK Prime Minister Theresa May for the Conservative leadership after saying her Brexit vision was “deranged.”
The rivalry and tension between US President Trump and Canadian Prime Minister Trudeau was apparent last week at the UN general assembly with Trump seeming to avoid any side meeting with Trudeau. At a G7 Summit in June, Trump called Trudeau “weak and dishonest,” and with NAFTA talks coming back into focus this week, the USDCAD currency pair will again be in the spotlight.
Monday sees the release of the Institute of Supply Management’s Manufacturing Index for September, expected at 60.3 (last month’s was 61.3). Canada also releases a version of its manufacturing PMI (SEP) expected at 56.6 vs last month’s 56.8. The Canadian dollar finished Friday on the front foot after stronger than expected Canadian GDP and an elevated oil price. The US is the more powerful negotiator in NAFTA talks as it is looking for a better deal. “No deal” could lead to tariffs against Canada and a weaker Canadian dollar. Higher US interest rates (the Fed raised US Interest rates by a quarter of one percent last week) should also counter any lasting Canadian dollar strength.
On Tuesday, the Reserve Bank of Australia announces its interest rate decision, and the likelihood, despite some improving economic conditions is that Australian interest rates will remain on hold at 1.5% for the moment. I’m watching all Australian announcements very carefully as I sense that the economy is picking up faster than the Reserve Bank is admitting and so I feel this is very positive for the Australian dollar.
On Wednesday, in the US, ISM Services for September is released which is expected at 58 (slightly shy of last month’s 58.5 print). Watch out also for the ADP employment report expected at +185K and generally seen as a good guide as to what to expect in Friday’s Non-Farm Payrolls.
On Friday, we have a big data day and all the excitement of USDCAD renewing its battle as both countries simultaneously release employment reports. Canada is expecting to add 30,000 jobs (having lost 51,600 jobs in August). The US Payroll number expected in at +185,000 will probably determine the magnitude of any move in the US dollar. Watch out for revisions in last month's number (+201k) and also the unemployment rate (expected to improve to just 3.8%). The US dollar is still calling most of the moves as far as currencies go. But how long will its momentum last?
Watch out for me on video this Wednesday and Friday. Good luck and good trading.
This Article was prepared and accomplished by Mr. Ben Robson in his personal capacity. The opinions expressed in this article are Ben’s own and do not reflect the view of EGM Securities.