By Ketki Saxena
Investing.com -- The Canadian Dollar weakened against its U.S. counterpart today, supported by as a stronger han expected U.S. job report raised bets for rate hike bets from the Federal Reserve helping the greenback rally sharply against a basket of currencies.
The loonie meanwhile was pressured by dismal Canadian jobs data that pared back expectations for the Bank of Canada’s path of policy tightening as the Canadian economy shows another indicator of a slowdown.
MUFG Bank also noted the USD/CAD pair as a pick of the coming week, in a note “Recommending a long USD/CAD trade idea to reflect our view that the USD will extend its rebound in the coming weeks”.
The USD/CAD Pair closed the North American Session today at C$ 1.2938 to a greenback, up 0.57% in the day’s trading, and with the day’s range of 1.2861 - 1.2984.
The U.S. dollar index sharply extended gains following today’s non-farm payrolls, which showed an increase of 528K jobs in July, well above even the most optimistic estimates and over double market expectations for a rise of 250K. The previous month's reading was also revised higher to 398K from 372K, while the unemployment rate also edged down to 3.5% from 3.6% in June.
The (much) stronger data revives bets for a large Fed rate hike at its September meeting, sharply boosting U.S. treasury yields and the U.S. dollar.
Canadian jobs meanwhile widely missed economic expectations, losing 30.6. K jobs in July against estimates for an addition ofl 20K jobs, as Canadian jobs contracted for the second month in a row in another indicator of the cooling economy as the Bank of Canada has successively and increasingly more aggressively hiked its benchmark interest rate.
The jobs contraction is a particularly significant indicator on the Canadian economy, and accordingly has investors paring back bets on the Bank of Canada’s path to policy tightening: it is the robust labour market in the United States that many economists believe has prevented its economy from slipping into a downturn despite two quarters of reduced growth.
MUFG notes that “Unlike the US labor market, there have been clearer signs of a slowdown in hiring in Canada. Employment has contracted for two consecutive months in June and July which supports our view that the Fed will tighten policy further than the BOC."