USD/CAD Strengthens After Canadian Jobs Upset
- The unemployment rate increased to 7.3% as resource sector loses 2.5% of jobs
- Canadian central bank rate cut expectations remain low for the medium term
- Recovering oil prices and strengthening US markets may bode well for Canadian jobs
The Canadian unemployment rate increased today to 7.3% in February versus 7.2% in January. Adding to the dour report, net full time employment unexpectedly fell by 2,300 positions. Looking more closely at the numbers, a remarkable 51,800 full time positions were shed – one of the biggest contractions in years. This move comes at a difficult time for Canada, as trade has been curbed by persistent weakness in oil and other commodities while its key partner, the US, sees its own economic struggle Perhaps this data would have altered the Canadian central bank’s decision to maintain interest rates at 0.50 percent earlier this past week. The next meeting is scheduled for April 13th.
The resource sector - which includes jobs related to the energy and oil sectors - shed the most jobs between January and February seeing a decrease of 2.5 percent. This reduction is likely a consequence of the weaker oil industry after December and January’s further sell off in crude prices. Regardless of this negative data release the overnight Canadian swaps show only a 13.3% probability of a cut at the next meeting. The very recent increase in oil prices, as well as renewed strength in the American economy have helped curb the dovish speculation that could have arisen from this event risk otherwise.
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