Home Forex Canada’s jobs report could shed light on BoC’s plans

Canada’s jobs report could shed light on BoC’s plans

by SuperiorInvest


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  • Canada’s unemployment rate is expected to rise in January.
  • A positive surprise could prompt the Bank of Canada to delay plans to cut rates.
  • Further cooling in the labor market could put the Canadian dollar under pressure.

Statistics Canada will release the Canadian Labor Force Survey report on Friday at 13:30 GMT. The consensus among market participants expects the labor market report to have a mixed tone and somehow reinforce the Bank of Canada’s recent decision to keep its interest rates unchanged.

After leaving interest rates on hold at 5.00% at its January 4th meeting, the Bank of Canada suggested at this meeting that it is still premature to start thinking about cutting the Bank’s interest rates as policymakers need more progress in key fundamentals to begin think about lowering interest rates. At the September meeting, the bank kept the base interest rate at 5.0%.

At the last event, BoC kept further tightening on the table in case inflationary pressure regained traction. On Tuesday, Governor Tiff Macklem said that “the policy interest rate at 5% is the level we believe is necessary to moderate the remaining inflationary pressures,” while noting that the debate about future policy is moving away from questioning whether monetary policy is tight . enough to consider how long to maintain the current position.

It is worth recalling that inflation data tracked by the Consumer Price Index (CPI) rose at an annual rate of 3.4% in the last month of 2023, rebounding from levels last seen in May last year.

According to Statistics Canada, the economy saw a marginal increase of 0.1 thousand jobs in December, extending the streak of job creation for the sixth straight month since the decline in employment that was recorded in July (-6.4 thousand).

Still around the key indicatorsCanadian Gross domestic product (GDP) unexpectedly fell at an annualized rate of 0.3% in the October-November period, following a 0.3% expansion in the previous quarter and a 0.6% gain in Q1 2023.

What to expect from the next print of the Canadian unemployment rate?

The focus remains on the upcoming Canadian labor market report, particularly the wage inflation data, which could have some bearing on the BoC’s plans to start cutting its monetary policy rates.

Economists expect Canada’s unemployment rate to rise slightly to 5.9% in January from 5.8% in December. In addition, the economy is expected to add 15K jobs during the final month after a marginal increase of 0.1K in the final month of 2023. Average hourly wages, a metric closely watched by the Bank of Canada, rose 5.0% in 2023. July compared to the previous year.

From the BoC’s Minutes issued on February 7, ratemakers expressed their concerns about continued pressure on wages and near-term inflation forecasts that remain significantly higher than before COVID. They emphasized that the widening output gap is expected to moderate inflationary pressures.

When is the August Canadian unemployment rate released and how could it affect USD/CAD?

The Canadian unemployment rate for December, along with the labor force survey, will be released at 13:30 GMT on Friday.

If domestic job creation were to weaken in line with easing wage inflation, this could convince markets that the BoC could finally move to an easing cycle in the relatively short term. In such a scenario, the Canadian dollar is likely to face further selling pressure. Conversely, if the labor market report delivers a positive surprise, it would reinforce the view that the central bank could maintain its current restrictive stance longer than expected, while encouraging the Canadian dollar to resume its weekly appreciation.

Pablo Piovano, US Session Manager and Senior Analyst at the company FXStreet, notes: “USD/CAD is hovering around the critical 200-day SMA near 1.3480. A sustained decline below this area in the near term is expected to open the door to a deeper retracement, initially targeting the late January lows near 1.3360 (January 31). A subsequent pullback should see no contention until the December lows around 1.3180, although this scenario appears unlikely as it would require a sudden and sharp deterioration in the dollar’s outlook.”

On the other hand, Piovano adds, “upside potential so far seems limited by the transitory 100-day SMA around 1.3555. A break of this area should find an immediate target at the December highs near 1.3620.

Economic indicator

Unemployment rate in Canada

Unemployment rate, released Statistics Canada, is the number of unemployed divided by the total number of civilian labor force in percentage. It is a leading indicator for the Canadian economy. If the rate increases, it indicates insufficient expansion in the Canadian labor market and a weakening of the Canadian economy. Generally, a decline in the value of the Canadian dollar (CAD) is viewed as bullish, while an increase is seen as bearish.

Read more.

Next release: 02/09/2024 13:30:00 GMT

Frequency: Monthly

Source: Statistics Canada

Canadian dollar price today

The chart below shows today’s percentage change for the Canadian dollar (CAD) against the major listed currencies. The Canadian dollar was strongest against the Japanese yen.

American dollar euros GBP CAD AUD JPY NZD CHF
American dollar -0.02% 0.07% -0.08% 0.44% 0.85% 0.26% 0.02%
euros 0.02% 0.09% -0.06% 0.46% 0.87% 0.27% 0.02%
GBP -0.08% -0.09% -0.14% 0.38% 0.78% 0.18% -0.09%
CAD 0.07% 0.05% 0.14% 0.52% 0.91% 0.32% 0.07%
AUD -0.45% -0.47% -0.37% -0.52% 0.41% -0.18% -0.46%
JPY -0.85% -0.88% -0.79% -0.94% -0.39% -0.58% -0.85%
NZD -0.26% -0.28% -0.18% -0.32% 0.19% 0.60% -0.26%
CHF 0.01% -0.01% 0.09% -0.06% 0.46% 0.84% 0.26%

The heat map shows the percentage changes of major currencies against each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will be EUR (base)/JPY (rate).

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