Canadian employment in June was up 32,000. As more people are searching for work, the unemployment rate increased 0.2 percentage points to 6.0 percent. Compared with June 2017, employment increased by 215,000 or 1.2 percent, with all the growth in full-time work.
U.S. employment report shows brisk growth and also a movement into the workforce is headlined by a stronger-than-expected 213,000 rise in nonfarm payrolls for June which just tops the consensus range. A sharp rise in the number of unemployed actively looking for a job, to 6.564 million from 6.065 million in May, lifted the unemployment rate 2 tenths to 4.0 percent.
The USDCAD is stronger on the back of the employment numbers, giving more reason for the Bank of Canada to initiate a rate hike next week, also oil prices seem to be determined to stay above the $70 mark for West Texas Intermediate. Currently, this morning, it’s $73.57 USD a barrel, a report has been released today by Sanford C, Bernstein & Co., LLC, a private research firm, which believes that due the current oversupply of oil that there has been a huge under investment in the oil industry. Their belief is that any unexpected shortfall in oil supplies could result in large spikes in oil prices , possibly reaching the same highs of 2008.
USDCAD 1.3080, 1.3045, 1.3028 1.320, 1.3155, 1.3176
USD-CAD has settled in the mid 1.31s after correcting from a one-year high that was pegged at 1.3387 last Wednesday. Expectations for the BoC to hike rates next week along with the big surge in oil prices have buoyed-up the Canadian dollar. USD-CAD has resistance 1.3210-11. Canadian data arrives today in the form of the June employment report release, which we expect to rise 25.0k after the 7.5k dip in May and 1.1k dip in April. The unemployment rate is expected to hold at a 40-year low 5.8%. Trade data is also due, where we expect the deficit to widen to -C$2.2 bln in May from -C$1.9 bln in April. Data in line with our estimates would support our expectation that the BoC will lift rates 25 bp to 1.50% at the July-11 announcement.
EUR-USD printed a three-week high of 1.1727. A solid 2.6% m/m gain in German industrial production in April data, which continued a run of encouraging data out of the Eurozone this week, gave a lift to the euro. Market focus will now fall squarely on the U.S. jobs report, where we expect the headline to rise 200k (median 191k) and the unemployment rate to hold steady at 3.8%. Hourly earnings are seen up 0.2% and the average workweek to hold unchanged at 34.5 hours. We seen the report as being positive for the dollar, assuming our forecasts, or better, are met. In the bigger picture, EUR-USD remains in a broadly consolidative phase after a downtrend from mid-April levels above 1.2400. The range over this phase has been 1.1508 to 1.1851. More of the same looks likely for now. A major “known unknown” is to how deep and how prolonged the Trump-led trade war with major economies will be, and what economic and currency market fallout this will cause. This is, for now, keeping directional commitment at bay.