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Canadian Dollar Edges Lower after Employment Reports

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Canadian Dollar Edges Lower after Employment Reports

The Canadian dollar edged lower against its US counterpart Friday, as investors assessed the latest batches of labour market data from Canada and the United States.

The Canadian dollar was trading at 0.9140 US, down 0.15 percent. The loonie reached an intraday high of 0.9165 prior to the labour market releases.

Canada’s economy added 25,800 jobs in May, following a net decline of 28,900 the previous month, Statistics Canada said today. Economists forecast a gain of 25,000. The unemployment rate edged up slightly to 7 percent as more people entered the labour force.

Employment gains were led by educational services, accommodation & food services, and agriculture. Growth in these sectors offset declines in natural resources and finance, official data showed.

The year-on-year growth figures underscored the weakness of the labour market. Employment was up only 86,000 year-on-year, with all the growth in part-time work. Today’s figures are unlikely to diminish concerns about Canada’s labour market recovery. According to Statistics Canada, job growth has been negligible since August 2013.

Further complicating the labour market picture is the lack of reliable labour market information in Canada, according to the federal Auditor General. The Auditor General has expressed concern about how Statistics Canada collects and presents its labour market information, which he contends offers little value to job-seekers.

Canada’s currency has been under pressure all week, weighed down by the latest Bank of Canada rate statement. The BOC effectively “talked down” the loonie Wednesday by repeating concerns about downside risks and weak exports. The BOC was unimpressed with Canada’s sluggish performance in the first quarter. The economy advanced only 1.2 percent annually in the first three months of 2014, weighed down by severe weather.

The BOC acknowledged the rise in inflation, but said it was due to temporary factors such as higher energy costs. So-called core inflation, which excludes volatile products such as food and energy, remains well below the BOC’s target threshold.

The loonie has declined 0.75 percent against the US dollar this week. Further declines for the loonie may occur in lockstep with a pickup in US activity. A stronger US economy will likely bring the possibility of a rate-hike back into the equation. The Federal Reserve talked about rate-hike procedures at the last FOMC meetings, but stopped short of outlining a timetable for when a change in policy might occur.

Canadian data resume next week with the release of housing starts, new house prices, capacity utilization and manufacturing shipments.

In the United States, May nonfarm payrolls increased 217,000, as employment returned to pre-recession levels. The gain, which was in line with expectations, eased concerns brought about by the latest ADP report showing US businesses added only 179,000 jobs in May.

Average hourly earnings increased 0.2 percent in May, following no growth the prior month. Year-on-year, average earnings were up 2.1 percent.

The unemployment rate was unchanged at 6.3 percent, official data showed.

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