Canada added jobs in August and its unemployment rate fell for a third-straight month to a fresh post-crisis low, even though full-time employment declined steeply in the month.
Wages also rose at the fastest pace in 10 months, although still below the 2% level.
The report indicated the economy shed -88,100 full-time jobs, but that was offset by a +110,400 increase in part-time employment.
The CAD is trading atop of C$1.2100 just north of this week’s dollar low move (C$1.2037) after Wednesday surprise Bank of Canada (BoC) rate hike of +25 bps to +1%.
Bank of Canada (BoC)
Three things that Bank of Canada’s (BoC) Poloz has done with this week’s surprise rate hike:
The BoC is now in rate “hike” cycle, but data dependent – fixed income dealers are beginning to price in +1.75% by the end of 2018.
Intraday, CAD is very much overbought, but there is ‘no’ reason to want to sell it at the moment. C$1.2030 is very strong dollar support – the USD needs to break above C$1.2350 – C$1.25 with conviction to get any dollar traction. With another Fed rate hike being priced out this will be difficult to sustain.
In the medium term, any USD rallies will see CAD buying to target C$1.1950-1.20. However, the “elephant” in the room remains NAFTA negotiations.