As next week’s Fed meeting approaches, more thoughts are being given to the impact of the relentless rise of the US currency on the broader economy. This in part explains why the dollar has become a little more reticent to push ahead, given that there are signs that it is starting to impact exports and with it, the outlook for the economy and inflation. But it’s not just about the dollar, given the appetite for lower currencies being seen elsewhere in the developed world, helped by cuts in interest rates and the move to quantitative easing in the Eurozone. Officially, dollar policy sits with the US Treasury and the Fed always steers will clear of giving any opinion on the dollar and certainly its value to other currencies. This contrasts with the Eurozone, where the ECB takes a more active approach. Worth bearing this in mind as we head into next week’s Fed meeting.
Main focus today will be jobs data in calendar, where a nudge higher in the unemployment rate is seen (up to 6.7%). There is also Michigan confidence data in the US at 14:00. For USDCAD, the 1.2799 level provides the initial level of resistance to the upside, marking the high seen late Jan and earlier this week, with the currency having been one of the better performance in recent weeks, thanks to the central bank keeping rates on hold and oil prices staging a modest recovery.