Daily Currency Update

USD - US Dollar

Today's focus is on the Non-farm payrolls and the August manufacturing ISM. Market analysts predict an increase of 165k, down from 187k in July and just below the general forecast of 170k. Moreover, the market anticipates a deceleration in average hourly earnings growth to 4.3% YoY from July's 4.4%. Most also suspect that the unemployment rate might increase slightly to 3.6% in August from the previous 3.5%, even though the general consensus expects it to remain unchanged. Concerning the manufacturing ISM, there's an expectation for a modest rise to 47 in August from 44 in July, although this would keep the index in the contraction zone. Investors will be keenly observing today's US data, searching for further indications that the US economy is on track for a gentle slowdown. If the data aligns, it will reinforce the soft-landing scenario and bolster the perspective that the Fed's tightening phase might have reached its climax, making a rate reduction the likely next step. However, given recent trends in both the FX and rates markets, it seems this expectation is already factored into the USD's value. Hence, only unexpected data shifts will likely influence the USD today, with the currency continuing to mirror US rates and yields.

CAD - Canadian Dollar 

Last month, the CAD performed better than its commodity currency counterparts, though it dropped to its lowest level against the USD since May. Despite the CAD's resilience, escalating risk aversion led to its decline, and consistent rate differentials didn't support a rebound in the USD/CAD. Notably, recent domestic data underscores the robustness of the Canadian economy, which today's GDP numbers might further highlight. Although the growth for Q2 2023 might not have met the BoC's forecast (1.0% vs. 1.5% QoQ), any early signs of an uptick in July's activity could bolster hopes of a GDP revival in the second half of 2023. This could maintain the possibility of a final BoC rate increase, though external factors might ultimately have a more significant influence on the bank's decision-making. Unless there's a prolonged wave of risk aversion in global markets, strong domestic factors could enable the CAD to recover some of its August losses.