Week in FX Americas – Loonie Rallies Despite Job Losses

Welcome to Canada’s swinging door job policy, one month up and the next down. Despite the disappointing -39,400-job loss headline, the commodity rich country’s unemployment rate is little changed. In fact, the rate is virtually unchanged from a year ago (+7.2%), while total employment is up +1.3% year-over-year. One cannot knock that it’s a positive number that reflects a modestly growing Canadian economy.

Digging deeper, its true, the headline looks bad, but some of the details are not as bad as you would think. The public sector cuts where much of last month’s decline came from (-74k, the largest on record can be attributed to the Harper governments austerity measures), should not be too big a surprise to many given the huge sector payroll increase at the beginning of the year. The July report is most likely playing catch up. Even better is that the private sector created jobs (+31.4k). This should be considered as a major plus for any economy going forward. Other details show that the labor force fell -14.2k from +66.7% to +66.5%. Wage inflation was almost non-existent (+1.8%, y/y), a good enough reason for the BoC to remain on hold indefinitely and not act on its mild rate hike bias.

What about the loonie? The first reaction was to sell CAD and end the currency’s weeklong rally. The weaker long Cad positions certainly got flushed out, however, the commodity and interest rate sensitive currency has since reversed its course. The loonie has managed to print weekly highs on the back of both oil and gold’s Friday appreciation shenanigans that has been influenced mostly by stronger Chinese data.

Investors seem more confident that China’s slowdown has stabilized – especially after Industrial Production numbers on Friday beat market expectations. Investors are ending the week looking to pick up currencies that will benefit from increased demand for their raw materials – Canada has abundance of commodities.

• US and Japan Wrap First TPP Talks
• US Fed Member Considers France Europe’s Biggest Threat
• Chinese Data allows more room to Boost Stimulus
• Fed Uncertainty Continues to Hurt the U.S. Dollar
• Fed Tapering Still Possible at September Meeting
• Continued Fed Uncertainty sees U.S. Dollar Fall Again
• Gold Continues to Rise After US Unemployment Claims
• Oil Continues to Fall as Fed Tapering Gets Jobless Claims Boost
• US Jobless Claims Rise on Weekly Basis
• Canadian Building Permits Drop 10 Percent in June
• U.S. Dollar Index at Seven Week Low
• US Mortgage Applications and Rates Rise
• Mark Carney’s Legacy in Canada
• Obama supports Continued Governmental Support for Housing Market
• Fed May Cut Purchases Very Soon
• Economists Favour Yellen as Fed Chief Successor
• U.S. Growth in Services Likely Picked Up

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