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CAD Strengthened on Positive Employment Data, Unemployment to 5.8%

CAD Strengthened on Positive Employment Data, Unemployment to 5.8%

Peter Hanks, Strategist

Talking Points:

  • Canada added 54.1k jobs in July, versus the expected 17k
  • On the back of the added jobs, unemployment fell to 5.8% from 6.0% in June
  • The positive data strengthens the case for a hawkish Bank of Canada moving forward

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Canadian employment data surpassed expectations Friday, temporarily boosting the Canadian Dollar. Jobs added for the month of July beat the forecasted 17k, weighing in at 54.1k. The strong addition to the labor force contributed to Canadian unemployment reaching 5.8%, lower than the 6.0% in June and the forecasted 5.9%. The figures are in line with recent data coming out of Canada, with GDP for May at 2.6%, beating the 2.3% estimate.

With the recent string of robust data, the Reserve Bank of Canada’s hawkish stance will likely continue in near-term. The last rate hike was on July 11th, with a 25 basis-point bump to 1.5%, the highest rate since 2008. The next rate decision facing the central bank is on September 5th, with futures seeing the probability of a hike around 22%.

In response to the news, the loonie temporarily bounced versus its southern counterpart in the greenback, but quickly surrendered gains. The USD/CAD pair climbed off the 1.3000 psychological level earlier in the week, now trading around 1.3085.

USD/CAD Price Chart: 15-Minute Time Frame, August 8 (Chart 1)

The loonie also gained ground versus the euro Friday, but the climb was largely due to the developing situation in Turkey. A bump can be seen in the pair around the time of the news release at 12:30 GMT but gains from the data were somewhat retraced.

EUR/CAD Price Chart: 15-Minute Time Frame, August 8 (Chart 2)

Next week is particularly light for economic data coming out of Canada, with the only event of high importance being CAD CPI on Friday. Last month’s CPI weighed in at 2.5%. To see other events for Canada and the major currencies, view our economic calendar.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.