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The US dollar lost ground versus its Canadian counterpart for most of the previous week. Then the US dollar surged 0.6% higher on Friday. However, this was a case of too little too late and the Canadian dollar was the overall gainer, up 0.1% across the week. The US dollar is holding steady versus the Canadian dollar in early trade on Monday.
Better than forecast US jobs data sent the US dollar soaring on Friday. 266,000 jobs were created in the US in November. This was well above the 180,000 jobs that analyst had forecast and is the strongest reading since January. Whilst some of these jobs could be put down to GM workers returning after the strike, the headline figure still impressed; job creation in the US is still solid.
The unemployment rate declined to 3.5%, down from 3.6%, as it returned to the low of 2019 and the lowest level since 1969. Average hourly wages, which are also closely watched, also surprised, increasing 3.1% year on year. Strong wage growth often indicates and uptick in future inflation.
The bullish report calmed fears over the health of the US economy ahead of the Federal Open Market Committee (FOMC) rate announcement later this week. The data has cemented expectations that the Fed won’t move on policy this month. According to the CME Fedwatch, markets are pricing in 99.3% probability of the Fed keeping interest rates on hold.
US – China trade tensions are under the spotlight at the start of the new week. Trump has called on the World Bank to stop lending to China. This will aggravate tensions between the two powers ahead of the 15th December deadline, when the Trump administration is due to apply more tariffs.
Canadian Jobs Report The Opposite Of The US Report
Last week, a relatively optimistic assessment of the Canadian economy by the Bank of Canada, gave the Canadian dollar its best one-day rally in over three months. The central bank left the base rate unchanged at 1.75% for the ninth straight month. This is now the highest interest rate among developed economies. The central bank also said that it still expected global growth to recover, whilst domestic growth remained resilient.
The Canadian jobs report on Friday, couldn’t have been more different from the US report. In Canada net employment fell by 71,200, a stark contrast to the 10,000 jobs that analysts forecast would have been created. The unemployment rate jumped by 0.4% to 5.9%, its highest level since September 2018.
This week is light on Canadian data. Monday sees the release of housing starts and building permits. Investors will also be watching trade headlines as the 15th December deadline for the next round of trade tariffs from the White House moves into focus.
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