Hamas attacks cause USD strength

Friday’s US employment data was sufficiently confusing to weaken the US dollar. The markets had expected a small reduction in America’s unemployment rate but that remains static at 3.8% despite a sizeable 336,000 jump in the number of people on the non-farm payrolls. It seems that the moderation in earnings growth was enough to stifle any US dollar buying and both the GBP/USD and EUR/USD  exchange rates rose on the day. However, the surprise attacks by Hamas on Israel put shivers through investors who very rapidly repurchased US dollars as a safe haven. This is an entirely expected and time-honoured tradition in times of geopolitical risk. The net result is that GBP/USD is down to $1.2175 and EUR/USD is back down to $1.0528. The sickening loss of 1,100 lives in Israel and the Israeli response to Hamas’s attacks will, understandably be the driving factor for the US dollar in the early part of this week. Any further escalation is likely to drive funds into the US dollar, strengthening it across the board. There are other factors at play later in the week which we will cover as the week progresses.

Employment gains and USD influence CAD

Canada created 63,800 fresh jobs in the month of September, keeping the unemployment rate down to 5.5%, although most commentators had expected a slight rise in their unemployment rate. On its own, that ought to strengthen the Canadian dollar and we did see some of that in the immediate aftermath of the data release but, as mentioned above, The US dollar declined later in the day and, so influential is US demand for Canadian products, but the Canadian dollar followed suit. The GBP/CAD rate topped out at roughly CAD 1.6750 before the news of the surprise attacks on Israel reversed all of that. The GBP/CAD  rate is down to CAD 1.6650 this morning. A Canadian National Holiday and a lack of other data today means the fate of the loonie lies with events on the eastern Mediterranean shores and the impact that has on the USD.