The foreign exchange playbook is always changing.
Soft US economic data can be good or bad for the US dollar, based on interest rates and the global growth cycle. In the past few years, quantitative easing often meant selling the US dollar on weak US data but with the printing presses running at full speed that may change.
This is the first non-farm payrolls report since QE3 so it’s a chance to evaluate the shifting correlations. Some things won’t change, the Canadian dollar will still suffer most on a soft US reading (so long as Canadian employment is somewhat close to expectations).
More broadly, it’s up in the air. This week we have seen the US dollar both rally and slump on positive economic news. The takeaway, for now, is to tread carefully.
