If the last week was all about the jobs data in the United States, traders will focus on commodity currencies this week – the Australian Dollar (AUD) and the Canadian Dollar (CAD).
The Reserve Bank of Australia (RBA) will announce on Tuesday the cash rate, and the Canadian jobs data is due on Friday – both especially important to AUD and CAD traders.
The Australian Dollar – One of the Best Performers in the COVID-19 Crisis
The RBA’s announcement on Tuesday is set to create volatility on AUD pairs. Despite the easing stance and the dovish messages sent since the start of the coronavirus pandemic from the RBA, the AUD rose across the dashboard.
After the initial drop attributed to the general risk-off environment in March this year, the AUD recovered all the losses and some more. The Aussie pair (AUDUSD) is back to the 0.70 level, after dropping as low as 0. 55. Literally, it rose in an almost vertical line, together with the remarkable comeback in the US equities.
However it is not only about the AUDUSD pair. All AUD pairs witnessed a move in favor of the AUD. The EURAUD, usually a proxy for risk-on/risk-off environments, trades close to 1.61 after exceeding 1.95 at the start of the crisis.
The RBA is likely to do nothing at this meeting, but surely does not like the ongoing strength in the AUD and will express its dovishness.
Canadian Jobs Data to Move the CAD Pairs
As a result of the national holiday in Canada last week, the Canadian jobs data was postponed to next Friday. Usually released together with the NFP, on the first Friday of each month, this time the U.S. and Canadian holidays changed the schedule.
The Canadian jobs data creates intense volatility on the CAD pairs, and it is particularly interesting to see the market’s reaction due to the pandemic. The way Canada and the United States responded to the COVID-19 crisis is quite different, with different results in terms of the infection rate that ultimately affect the value of a currency in the short and medium-term. Also, before Friday’s jobs data, the Bank of Canada will release its Business Outlook Survey – a quarterly publication and a leading indicator of economic health.
All in all, expect a trading week with a focus on commodity currencies. However, it is interesting to see how the market participants choose to trade the USD, after the controversial NFP report last Friday.