USD/CAD Trades Higher Despite Jobs Growth Picking Up in Canada
- August Canadian jobs growth at +26.2K versus +14.0K expected; unemployment rate ticks up to 7.0%.
- USD/CAD falls momentarily after the Canadian Labor Force Survey but recoups losses soon thereafter.
- As market volatility is set to rise with summer ending, it's a good time to review risk management principles.
After two consecutive months of net job losses, the Canadian labor market staged a strong turnaround in August as the pace of hiring accelerated, Statistics Canada reported today from Ottawa. Statistics Canada said that the economy created +26.2K net jobs last month, a sign that economic recovery may be on course. Economists polled by Bloomberg News had expected to see an addition of 14.0K new positions. Meanwhile, the unemployment rate edged up to 7.0%, in line with consensus, as the participation rate increased to 65.5% from 65.4% in July.
The strong rebound in employment was due to a gain of +52.2K in net full time positions in the month while slightly offset by a loss of -26.0K in part time jobs. Robust gains in full-time employemnt suggest, however, that the quality of work available is improving. Needless to say, the upbeat labor market report may reverse the dovish sentiment about the state of the economy and could convince skeptips that recovery is back on track.
The data comes on the heels of poor economic performance in Q2'16 which showed GDP contracted by-1.6% at an annualized rate.The largest quarterly decline since 2009 was in part due to the Fort McMurray wildfires that shut down some energy production and forced the evacuation of more than 100,000 local residents.
Here is what’s driving the Canadian Dollar this morning:
- CAD Unemployment Rate (AUG): 7.0% as expected, from 6.9%.
- CAD Net Change in Employment (AUG): +26.2K versus +14.0K expected, from -31.2K.
- CAD Full Time Employment Change (AUG): +52.2K from -71.4K.
Chart 1: USD/CAD 1-minute Chart Intraday (September 9, 2016)
Immediately after the release of the Canadian Labor Force Survey, USD/CAD fell as low as C$1.2937. Gains for the Loonie, however, were short-lived as the USD/CAD had managed to rise to C$1.3005 at the time this report was written; general US Dollar strength has been observed on the day.
--- Written by Christopher Vecchio, Currency Strategist and Diego Colman, DailyFX Research
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