After an impressive 22,800 new jobs were added in December the forecast called for a lower number in January, but instead the figure released by Statistics Canada was well below expectations of 5,200 new jobs. Canada lost 5,700 jobs in January. The job losses pushed the unemployment rate to 7.2 percent. The energy sector was the hardest hit, with oil-rich province of Alberta losing more than 10,000 jobs with a provincial 7.4 percent unemployment rate.
The USD advanced 1.12 percent versus the CAD as the employment picture was rosier for Americans. Although the U.S. non farm payrolls (NFP) missed expectations of 190,000 new jobs, it did add 151,000 and the unemployment rate improved to 4.9 percent, the lowest since 2007. The biggest driver of USD gains was the rise in wages by 0.5 percent. The inflationary signal is good news for the Fed that is consistently worried about lack of growth.
The USD/CAD traded in a 186 pip range with session lows at 1.3710 ahead of the employment reports release. After the diverging job outlooks were posted the pair has trader near the 1.39 price level as the CAD optimism has evaporated.
Oil is having a quiet day with a 0.52 percent loss for Brent crude with West Texas dropping 1.66 percent after the USD gained versus commodity currencies and the commodities that back them.
Canadian housing indicators will be released next week with the number of permits and the new house price index to give more insight into how low interest rates continue to have a positive effect even as the currency depreciated.
BOC Deputy Governor Timothy Lane will deliver a talk titled: Monetary Policy and Financial Stability—Using the Right Tools. The Bank of Canada (BoC) decided to hold rates unchanged in January after a rapid decline in oil prices pushed the loonie to record low levels and added to market expectations of a rate cut by the central bank. Governor Stephen Poloz is waiting for the fiscal stimulus promised by the Liberal government to be announced in March before using the limited tools at his disposal with the Canadian interest rate at 50 basis points. The mention of unconventional tools has markets speculating if the BOC could join the negative rates club and that is something to look for in Mr. Lane’s speech in Montreal on Monday.
CAD events to watch this week:
Monday, February 8
8:30am CAD Building Permits m/m
12:05pm CAD BOC Deputy Governor Speaks
Thursday, February 11
8:30am CAD NHPI m/m
*All times EST
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar
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Alfonso Esparza
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
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