Last week's price action in the Canadian dollar marked a major "sea change" for the currency. Whereas the loonie had previously been lumped in with the other commodity dollars struggling to recover from the big downdraft in the price of hard goods, last Wednesday's rate hike from the Bank of Canada injected new life into the currency.
Gold has been undermined by rising government bond yields owing to major central banks generally turning more hawkish while the still-buoyant equity markets means there has been reduced demand for the perceived safe haven asset. Thus, for the time being, the impact of the weaker U.S. dollar is not having any meaningful impact on the buck-denominated precious metal.
After an eventful day in the markets yesterday, U.S. stocks are higher, but off their best levels; gold is also up while crude oil has given up its earlier gains. In FX, the U.S. dollar is mostly weaker but not as much as the euro, while the British pound is up slightly and the Canadian dollar is significantly higher.
The U.S. dollar is higher against most major pairs after a jobs report that added more than 200,000 positions. The Canadian dollar was the outlier making gains against the greenback on the back of a similar strong jobs report that validates the hawkish comments from the Bank of Canada in the last three weeks.
The U.S. Bureau of Labor Statistics just reported the June Non-Farm Payrolls figures, and while the data wasn't perfect, it is certainly reassuring for bulls on the U.S. economy. On a headline basis, the U.S. economy added 222,000 jobs in June, solidly above economists' expectations of 175,000 new jobs. In addition, the BLS revised its estimate of jobs growth in the previous two months higher, for a net addition of 47,000 more jobs.
The U.S. dollar/Canadian dollar currency pair has taken a sharp drop over the past couple of days. For once, the sharp move hasn’t been because of crude oil. Instead, it was driven by comments made by Bank of Canada officials, suggesting that the central bank was preparing to raise interest rates.