USD/CAD – Silver lining In Canada’s Job Report, But Its a Big Dollar Story

  • Canadian job losses mount
  • BoC willing to sit out H1
  • NFP revisions have a material impact on ‘big’ dollar
  • Market eyes next event risk – Greece

North America employment data produced bi-polar reports on Friday. Canada lost jobs (-19.7k), but kept their unemployment steady at +6.8%, while U.S NFP hit market expectations, reporting a headline gain (+223k) with an improved unemployment rate (+5.4%). However, the U.S report did manage to record a significant downward revision to March’s already disappointing print (revised down to +85k from +126k).

The NFP revision means March was the weakest hiring month in three-years. Investors will now be looking to next Tuesday’s JOLT (Job Openings and Labor Turnover) survey to better understand what happened. It’s a survey that the Fed watches closely and it will give details regarding the churn in the labor markets, the number of job openings, layoffs and other job separations.

Canadian report brings hope

In Canada, the experts were expecting a headline loss of -5k, while the jobless rate would stay steady at +6.8%. Behind the April headline job decline the details are not necessarily that negative. Full employment advanced +46.9k and the private sector added +24.2k while the losses were concentrated in part-timers, the public sector and self employed. The mix would suggest that the declines found full-time work elsewhere. Even more positive was hours worked rose +0.3%, reversing the March’s -0.3% decline.

The CAD’s immediate reaction was to shoot much higher (C$1.2050) mostly dragged along by the underwhelming “big” dollar move against G7 currencies. Here it ran into a plethora of USD buyers. Now that the market has digested the NFP impact, a report that had something for both the dove and hawk, has not taken a Fed June hike entirely off the table (September is the bigger bet). The loonies current moves are mostly at the mercy of what the dollar is doing.

Investors prefer to stay away

The mixed Canadian report is not capturing the eyes of investors. The CAD has managed to give up all its gains and then some (C$1.2129), dictated by dollar moves. Speculators do have laddered orders of USD’s to sell north of C$1.2150 first go around. Even the BoC suggest that it’s going to sit out a weak H1 for the economy in anticipation for a better H2. This means that Governor Poloz will not be required to change course and that January’s surprise rate cut will probably be enough. With the lack of market interest in the CAD and Greek event risk on the horizon should favor the USD bull heading into the weekend. The techs short-term target remains at C$1.2300.

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell