The Canadian dollar appreciated on Friday after the release of the Canadian jobs report. The economy added 10,000 jobs, but it was the improvement in wages that was a positive for the loonie. Wages have grown 2.2 percent annually putting pressure on the Bank of Canada to hike a third time in 2017. The strength of the loonie had an effect in a disappointing trade balance earlier in the week. Exports are on a downward trend and a rise in Canadian interest rates would put exporters in a tougher spot.
Dovish rhetoric from Bank of Canada policymakers continues to signal rates will remain unchanged until the end of the year. In June, the BoC quickly signalled an upcoming rate hike before raising the cost of borrowing by 25 basis points and again in September. The central bank was critisized for its lack of communication on the second rate hike that leaves the benchmark rate at 1.00 percent. The Canadian economy appears to be cooling, which has had the same effect on the eagerness of the central bank to hike for a third time.
The USD/CAD lost 0.14 percent on Friday. The currency pair is trading at 1.2547 after Canadian wages rose, improving the slim chances of a third rate hike in 2017. Although the headline jobs number was a disappointing 10,000 after 14,000 were expected, the fact that wages went up and the unemployment rate down to 6.2 percent added to a stronger loonie. Full-time jobs were the biggest winners, reversing the trend of part-time jobs driving the headline higher.
Canadian data will be scarce next week, with Monday, Oct. 9, being a bank holiday. Highlights will include a pair of speeches from Bank of Canada (BoC) Deputy Governor Carolyn Wilkins, housing data (starts, permits and new house price index). The biggest releases will be in the United States coming after a strong NFP FOMC member speeches, the release of the minutes from the September FOMC meeting, U.S. producer price index, inflation and retail sales.
The next hurdle for a December rate lift by the U.S. Federal Reserve will come with the release of retail sales and consumer price index (CPI) data on Friday, Oct. 13, at 8:30 a.m. EDT. Retail sales were weaker than expected in September with a contraction in the headline number. Inflation, on the other hand, met the forecast, and given the focus will be on the CPI for clues that validate or weaken a case for a Fed December hike.
Market events to watch this week:
Tuesday, Oct. 10
4:30 a.m. GBP Manufacturing Production m/m
Wednesday, Oct. 11
2 p.m. USD FOMC Meeting Minutes
Thursday, Oct. 12
8:30 a.m. USD PPI m/m
8:30 a.m. USD Unemployment Claims
10:15 a.m. EUR ECB President Draghi Speaks
11 a.m. USD Crude Oil Inventories
Friday, Oct. 13
8:30 a.m. USD CPI m/m
8:30 a.m. USD Core CPI m/m
8:30 a.m. USD Core Retail Sales m/m
8:30 a.m. USD Retail Sales m/m
*All times EDT.
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