USD/CAD Canadian Dollar Higher After Oil Bounce and Dollar Selloff

The Canadian dollar bounced back on Friday with gains against the US dollar despite a miss on the number of jobs added to the economy. Canada added 3,200 jobs in April, short of the 20,000 expected. Wages also fell by 0.7 percent with the only silver lining an improvement on the unemployment rate down to 6.5 percent, but that is mostly due to 45,500 departing the workforce. Jobs have been strong in the previous 9 months adding 277,000 jobs during that period.

The loonie will finish the week on a negative note as the USD advanced 0.68 percent in the last five days. Weaker oil prices and uncertainty regarding trade with its biggest partner have depreciated the currency. The third factor is the softer economic data of which the recent Canadian jobs data is another example.

Bank of Canada (BoC) Governor Stephen Poloz was in Mexico City yesterday and warned the US against increasing tariffs as it would put their own productivity in danger. Poloz said: “We know that with protectionism everybody loses eventually, including the country that puts the policies in place,”. Trade with the United States is anticipated to change after the Trump administration has called for a renegotiation of the NAFTA. Mexican officials have started lobbying directly with states in the US that would be directly affected by a radical change to the existing agreement.

The USD/CAD lost 0.403 in the last 24 hours. The pair is trading at 1.3703 after the release of the U.S. non farm payrolls (NFP) failed to spark a US dollar rally on Friday. The US added 211,000 and kept the hope of a June interest rate hike alive. The political uncertainty around the healthcare bill that just passed that house will keep the dollar subdued. French elections over the weekend will keep market on its toes, although the lead in the polls of Emmanuel Macron has reduced the risk premium for the event.

Oil managed to advance 1.081 percent on Friday, but is still down 6.299 percent on a weekly basis. The West Texas Intermediate is trading at $45.83 after starting eh week near $50. The lack of demand for crude and distillates has created a glut of supply despite the efforts of the Organization of the Petroleum Exporting Countries (OPEC). The organization has worked toward reaching a new agreement to extend the production cut deal that stabilized prices, but with US producers increasing activity it is questionable that even that could boost prices as the all important demand remains weak.

Gold continues to slide downward on Friday. The yellow metal is down 0.105 percent on the final day of the trading week. It is trading at $1,227.84. The precious metal lost 3.09 in the last five days as political risk was downgraded after the French presidential debate solidified the lead of Emmanuel Macron ahead of Sunday’s vote. The appetite for safety has been reduced putting pressure on gold.

Market events to watch this week:

Monday, May 8
9:30pm AUD Retail Sales m/m
Tuesday, May 9
5:30am AUD Annual Budget Release
Wednesday, May 10
10:30am USD Crude Oil Inventories
5:00pm NZD Official Cash Rate
5:00pm NZD RBNZ Rate Statement
6:00pm NZD RBNZ Press Conference
9:10pm NZD RBNZ Gov Wheeler Speaks
Thursday, May 11
4:30am GBP Manufacturing Production m/m
7:00am GBP BOE Inflation Report
7:00am GBP MPC Official Bank Rate Votes
7:00am GBP Monetary Policy Summary
7:00am GBP Official Bank Rate
8:30am USD PPI m/m
8:30am USD Unemployment Claims
Friday, May 12
All day G7 Meetings
8:30am USD CPI m/m
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m
10:00am USD Prelim UoM Consumer Sentiment
Saturday, May 13
All day G7 Meetings

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

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.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza