After an optimistic labor market report last Friday, which showed that American employers added more workers than forecast to payrolls in October, risk confidence in the financial markets wane anew, and the USD/CAD is seen likely to tinker with price parity yet again.
Beating the median estimate by economists, Labor Department figures showed Friday that hiring increased by 171,000 workers in the past month after a 148,000 gain in September. In addition, a rush of people entering the labor force pushed the jobless rate higher, reports show a few days before this week’s presidential election. Nevertheless, the stock markets ended last week’s unusual storm-shortened trading with a selloff, as major indexes erased early gains sparked by the payrolls report.
Earlier today, Asian shares fell while boosting demand for the safety bet US dollar as investors shied away from risk ahead of the closely fought US presidential election. The same is true of the European markets with investors keeping caution. Market participants believe that the result of the elections could define a clear direction for broader markets.
According to a report by CNBC.com, Rebecca O’Keeffe, Head of Investment at Interactive Investor, said in a morning note that, “as we enter the last two days of the US presidential election campaign, the market will remain focused on the potential outcome. The market is convinced that an Obama victory remains a high probability, despite the closeness of recent opinion polls, hence any last minute swing towards Romney might cause some volatility. With the urgent need to resolve the looming fiscal cliff, the changing composition of the House and Senate will also be crucial.”
True enough, finance chiefs of the world’s 20 leading economies meeting in Mexico are ringing alarm bells over the US fiscal cliff. The European region’s debt woes are also of concern as they look to push back deficit reduction targets to help boost growth. The G20 are fearful of the likelihood that failure to limit the damage of the so-called fiscal cliff would tip the world’s largest economy into recession and drag their countries down with it.
From the Maple Leaf, employers just added 1,800 jobs last month, according to Statistics Canada. This follows two consecutive months of better-than-expected employment changes. Thereafter today, StatsCan is anticipated to report that Building Permits in September fell by 2.6 percent. This is seen to further drag the demand for the riskier Loonie, especially as it follows a buoyant 7.9 percent rise in August.
With the market focus on the US elections, and with risk confidence on a low to start the week’s exchanges, a buy bias for the Greenback-Loonie is suggested today. Expect technical price corrections to ensue.
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