The Canadian dollar appreciated on Friday to reverse the trend from earlier in the week. The loonie gained 0.34 percent after the release of the Canadian jobs report. Statistics Canada showed that the Canadian economy added more jobs than expected and wages were up 2.4 percent on an annual basis and could bring back to the table a December rate hike by the Bank of Canada (BoC).
The added jobs were mostly full time positions and the employment wins took the CAD higher against the USD. The U.S. non farm payrolls (NFP) had lofty expectations given the contraction reported in September due to the negative impact of the hurricanes in the US. The US was anticipated to have gained more than 300,000 jobs, but fell short with only 261,000 and despite an upward revision the most important indicator was always going to be the hourly earnings. US average hourly earnings were flat in October giving more ammunition to the doves in the Federal Open Market Committee (FOMC) to resist further lifts to the US interest rate.
The Canadian trade deficit remained unchanged with drop to both exports and imports. It is the fourth month in a row that both sides of the trade balance dropped at the same time. Exports and imports fell by 0.3 percent leaving the overall indicator unchanged. US imports rose by 0.4 percent while exports dropped by 1.2 percent shrinking the trade surplus with the southern neighbour.
The USD/CAD lost 0.33 percent in the last five days. The currency pair is trading at 1.2775 after the dual release of Canadian and US jobs data. The USD appreciated in the first half of the week and reached its highest point near 1.29 ahead of the November Federal Open Market Committee (FOMC) meeting concluded with a the US central bank holding rates unchanged while in Ottawa Bank of Canada (BoC) Governor Stephen Poloz delivered a dovish testimony on the economy to the Canadian Senate.
The Canadian economy added 35,300 jobs with the gains coming in full time employment. Forecasters had predicted a 15,000 gain. Wages also rose to the biggest gain in 18 months boosting the loonie agains the dollar for a 0.38 percent gain on Friday. The improvement in economic data once again has put forth the argument for another rate hike before the end of the year. The BoC already hiked twice in 2017, but only by enough to return to 2015 levels. The Canadian benchmark rate stands at 1 percent.
The price of energy surged in the last five trading sessions. West Texas Intermediate is trading at $55.52 due to the rise of geopolitical risk in oil producing countries. The Kurdish independence referendum in Northern Iraq will continue to affect supply from the oil rich region, while current prices continue to cause financial headaches for Venezuela who bet heavily on the price of oil to balance its budget. The Southern American nation will seek to restructure its foreign debt, but there is a high risk that it could default compromising the state owned oil company.
The cuts to production agreed by Organization of the Petroleum Exporting Countries (OPEC) and other major producers have achieved stability in the oil market and the promise of extending those cuts have taken oil prices to mid 2015 levels. Doubts still remain on how much demand has really recovered. The stability in prices can be easily disrupted as soon as the US shale industry shakes off the effects of the hurricane season and increases the rig count to take advantage of the rising price of crude.
Market events to watch this week:
Sunday, November 5
10:00 pm NZD Inflation Expectations q/q
Monday, November 6
11:30 pm AUD Cash Rate
11:30 pm AUD RBA Rate Statement
Tuesday, November 7
1:45 pm CAD BOC Gov Poloz Speaks
Wednesday, November 8
11:30 am USD Crude Oil Inventories
4:00 pm NZD Official Cash Rate
4:00 pm NZD RBNZ Rate Statement
5:00 pm NZD RBNZ Press Conference
Thursday, November 9
9:30 am USD Unemployment Claims
8:30 pm AUD RBA Monetary Policy Statement
Friday, November 10
5:30am GBP Manufacturing Production m/m
*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar