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.


* CNY New Yuan Loans
* JPY Gross Domestic Product
* JPY Bank of Japan meeting minutes
* EUR German Consumer Price Index
* GBP Consumer Price Index
* EUR German Economic Sentiment
* USD Advance Retail Sales
* EUR German Gross Domestic Product
* GBP Bank of England Minutes
* EUR Euro-Zone Gross Domestic Product s.a.
* USD Consumer Price Index
* USD U. of Michigan Confidence

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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