The Canadian dollar was lower against the U.S. greenback despite the price of oil surging more than 4 percent. A day after the Bank of Canada (BoC) kept the benchmark rate unchanged that started a sell off of the Canadian currency the central bank deputy Timothy Lane delivered a speech that displayed the two speeds present in the economy. Despite the efforts from the government and the central bank the Canadian economy is still the story of the Resource based economy and the rest. The drop in energy prices has hit the resource based sectors and despite a lower currency exports to the U.S. have not grown as expected.
The talk by Deputy Governor Lane clearly outlined the impact of energy prices in employment, retail sales and housing resales. In all three the energy producing provinces were negative, while the rest of Canada was overall positive. The job market in Canada has not fully recovered from the effects of the 2008 crisis. Despite missing the most severe impacts the Canadian economy did not enjoy a steady recovery as crude prices started to tumble. The end of the commodity super cycle came at a bad time, once the shield of the economy it became its biggest headache and in turned forced the BoC to cut rates twice in 2015.
Canadian employment data will be released on Friday, September 9 at 8:30 am. Not sharing a release date with the U.S. non farm payrolls (NFP) will give the report higher impact on the Canadian currency. Last month the economy lost a surprising 31,200 jobs on a 10,000 gain forecast. The estimate for tomorrow is a gain of 16,000 jobs after the massive losses in July.
The USD/CAD gained 0.227 percent in the last 24 hours. The currency pair is trading at 1.2929 after the BoC dovish comments on Thursday. The USD has not advanced versus the CAD on its own merits as American data has been mixed. Canadian data has been poor as the central bank has joined other monetary policy bodies in a “wait-and-see” mode that gives rise to uncertainty. The surge in oil prices has kept the loonie below the 1.30 price level, but it could easily break above it if employment disappoints tomorrow.
West Texas oil rose 4.467 percent in the last 24 hours. The price of WTI is trading at $47.17 surging after the U.S. crude oil weekly inventories had a bigger drawdown (14.5 million) than the expected small buildup (0.5 million barrels). Tropical storm Hermine was blamed for the lack of production last week in the Gulf of Mexico. Rising energy imports in China and ongoing chatter about a possible oil output freeze to be agreed to in Algiers by Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members boosted the price of crude.
Market events to watch this week:
Friday, September 9
8:30am CAD Employment Change
8:30am CAD Unemployment Rate
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar