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Canadian Dollar Plummets as Weak Job Numbers Weigh

H.S. Borji
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The Canadian dollar fell to a nearly two-week low on Monday, as last week’s disappointing jobs report overshadowed a surprise surge in July building permits.

The loonie, as the Canadian currency is called, plunged 0.80 percent to 0.9114, erasing early-month gains that resulted from a high-profile corporate merger involving Tim Hortons, as well as a stronger than forecast second quarter GDP report.

The USDCAD exchange rate advanced 0.88 percent to 1.0976. The pair is testing the 1.0973 resistance after overcoming the 1.0909 and 1.0939 barriers.

The loonie weakened against the euro, as the EURCAD advanced 0.44 percent to 1.4155. The pair faces immediate support at 1.4053 and resistance at 1.4141.

The loonie advanced against the British pound, as the prospect of Scottish independence continued to weigh on sentiment. Meanwhile, UK house prices rose at a slower rate than forecast last month. The GBPCAD declined 0.47 percent to 1.7677. The pair faces immediate support at 1.7710 and resistance at 1.7807.

Canada’s currency was little changed against the Japanese yen, as the CADJPY consolidated at 96.55. The pair faces initial support at 96.11 and resistance at 97.08.

The Canadian dollar is still troubled by a disappointing jobs report released on Friday showing overall employment unexpectedly declined last month.

Overall employment in the world’s eleventh largest economy declined 11,000 in August, following a revised gain of 41,500 the previous month, Statistics Canada reported last week. Economists forecast a second consecutive monthly increase at a rate of 10,000.

The unemployment rate held steady at 7 percent, as expected, as workforce participation eased to 66 percent from 66.1 percent.

Canada has registered negligible employment growth over the past year, adding to the economy’s already troubled outlook. Overall employment increased just 81,000 or 0.5 percent compared to August 2013, official data showed. According to the Bank of Canada, the economy will operate below capacity until the middle of 2016. As a result, interest rates are likely to remain low for some time.

The BOC held its target for the overnight rate at 1 percent at the September policy meetings, marking the fourth consecutive year the cost of borrowing was left unchanged. According to economists, the BOC will likely keep interest rates low until the middle of next year. However, economists generally feel the BOC’s next move will be a rate hike rather than another cut.

The BOC said last week it was pleased with Canada’s export growth in the second quarter, which helped overall GDP expand at a faster rate than forecast.

In economic data, Canadian building permits unexpectedly surged in July, as authorizations for multi-family dwellings rose to a new record high.

The value of building permits advanced 11.8 percent, following a gain of 16.4 percent in June. Economists forecast a decline of 10 percent.

On Tuesday Statistics Canada will report on housing starts. August housing starts are forecast to fall below the 200,000 mark, in seasonally adjusted terms. The United States had no major releases scheduled for Monday.

The Commerce Department will report on wholesale inventories on Wednesday, followed by retail sales and business inventories data on Friday.

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