USD/CAD Canadian Dollar Rises After Massive Job Gains in April

The Canadian dollar rose 0.37 percent after a monster April jobs report. The economy added 106,500 jobs blowing away forecasts of a 11,600 gain. Bank analyst are urging some caution and to take the numbers with a grain of salt. That could be hard to do with the data hitting a historic (since records were first recorded in 1976) record. The forecast was calling for a rebound from the 7,200 jobs lost in March and the positive news put the loonie up against the greenback. Half of the gains in April came from part-time jobs and inflationary pressures are still inching along although at a moderate pace.

usdcad Canadian dollar graph, May 10, 2019

US-China trade anxiety limited the move for the CAD as few details have emerged and rumours could be pointing to a negative outcome as per President Trump’s tweets and Chinese press. There is still optimism in the market that the deal will go through in the long term, but in the short term there is a lot of uncertainty surrounding the upcoming tariffs and the outcome of the US-China talks this week.

The positive jobs surprise backs some of the statements of the Bank of Canada (BoC) but one report will not make for a sudden 180 degree turn from the central bank. A soft first quarter and increasing macro headwinds will keep the BoC from hiking interest rates.

The US dollar is lower against major pairs on Friday as US-China trade talks have wrapped up for the day. US Secretary Mnuchin said the talks were constructive and trade negotiator Liu said that they went fairly well. The mixed signals from President Trump earlier had put pressure on energy prices and global stock markets, but positive comments from both sides sparked a rebound near close of trading for the week.

Oil Rises After Mnuchin Constructive Comments on Trade

Oil prices were under pressure on Friday as the fate of the US-China negotiations remains unclear. US sanctions and the contamination of Russian shipments are giving some support to the black stuff, awaiting any developments from the trade talks.

West Texas Intermediate graph

The dispute between the two largest economies is putting downward pressure on energy prices as global growth forecasts would be impacted if a deal is not agreed. Energy demand would fall as economic growth slows. Crude

Yellow Metal Higher on Trade Uncertainty

Gold prices are 0.19 percent higher on Friday as safe haven flows are pouring into the yellow metal amidst US-China trade negotiation uncertainty. Investors looking for safety as stocks are trading under pressure as no details have emerged. The true cost of a full-on trade war is hard to quantify and there is still time to smooth the differences but this time the market might need more than positive comments to once price in a positive outcome.

Gold will continue to rise if uncertainty surrounds the nature of the US-China conversations going into the weekend.

STOCKS – Stocks Rebound on Positive Trade Comments

US stocks were falling until US Secretary Mnuchin chimed in with his assessment of the US-China trade talks. He said talks were constructive and as the first direct comment it reversed the direction of US equities. President Trump has tweeted mixed signals as he has expressed hope that China is ready to sit at the table, while at the same time praising the impact of potential tariffs if they do happen.

Negotiation tactics aside, the true impact of a full-blown trade war would hurt consumers on both sides which is why investors are staying in the sidelines.

The Uber IPO debuted on a tough day of trading. The US-China trade talks were sucking the air out of the market and it wasn’t until after the Mnuchin comments balanced out Trump tweets that investors went back in. News of a grace period for Chinese goods subject to the new tariffs means that there is still time for China.

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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