Week in FX Americas – Loonies Reprieve From Jobs Data

Canada’s labor force survey headline looked solid on Friday, however, on drilling down it was weak in the details. Canada added more jobs than expected last month, fueled by full-time hires; it was able to drive the unemployment rate down to +7% from +7.2%.

The economy added +29.4k new jobs in January, rallying back from December’s bleak report that logged a loss of -44k positions. Breaking the numbers down further, there were a total of +50.5k full-time positions created, while -21.1k part-time jobs were lost. More importantly, and certainly a concern to Canadian policy makers, is that domestic job growth was driven mostly by the self-employed category, +28.3k to be precise. The number of paid jobs only grew a paltry +1k. Employment creation last year was the worst in four-years (+0.8% or +146k). This “distorted” monthly labor gain was able to push the unemployment rate down two ticks to +7%. This happens to be the same level as 12-months ago, which suggests that the current job growth rate is ticking over just enough to keep up with the labor force population growth.

What about the Loonie? The initial market reaction saw the CAD gather strength and trade below the psychological $1.10 handle briefly. There it seemed to have run into a brick wall of dollar buying for now. The techies would have us believe that loonie was in danger of entering oversold territory on the week. The loonies immediate reaction to a somewhat mixed jobs report would certainly back that. The CAD needs to penetrate the 1.0975 with gusto to maintain a bullish sentiment; conversely trading through its pre-job opening level 1.1075 would be dragging it back into bear territory, opening up an attack to contest USD/CAD yearly highs.

WEEK AHEAD

* GBP Bank of England Inflation Report
* AUD Employment Change
* USD Advance Retail Sales
* CNY Consumer Price Index
* EUR French Gross Domestic Product
* EUR German Gross Domestic Product
* USD U. of Michigan Consumer Confidence

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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
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Dean Popplewell