Connect with us


Canadian dollar drops to six-week low after strong US jobs data – MarketPulse



The Canadian dollar had a rough week and declined 1% against the US dollar. On Friday, a combination of lukewarm job data out of Canada and a hot US nonfarm payrolls report sent USD/CAD up 0.70%. The Canadian dollar is unchanged on Monday, trading at 1.3769.

Employment in Canada rose by 26,700 thousand in May, after a massive gain of 90.4 thousand in April. This beat the market estimate of 22.5 thousand but full-time employment took a hit and declined by 35.6 thousand, compared to a gain of 40.1 thousand in April. The bulk of the job growth was in part-time employment, which points to weakness in the labor market as Canadians are having trouble finding full-time work. As well, the unemployment rate ticked up to 6.2%, up from 6.1% in April.

Wage growth surprised on the upside, rising from 4.8% y/y in April to 5.2% y/y in May. Monthly, wages rose to 0.4%, up from 0.2% in April. This increase could make it more difficult for the Bank of Canada to follow with another interest rate cut, as policy makers have been reluctant in the past to lower rates because of strong wage growth. The BoC lowered rates last week, its first cut since it started its rate-tightening cycle in March 2022. The BoC meets next on July 24th.

US nonfarm payrolls shine

There has been lots of talk of a slowdown in the US labor market but job growth was much stronger than expected in May. Nonfarm payrolls rose 272 thousand, blowing past the market estimate of 185,000 and much stronger than the revised gain of 165 thousand in April.

Wage growth was higher than expected, rising to 4.1% y/y, up from a revised 4.0% in April and above the market estimate of 3.9%. Monthly, wages climbed 0.4%, up from 0.2% and higher than the market estimate of 0.3%. Surprisingly, the unemployment rate crept up to 4%, up from 3.9% in April and above the market estimate of 3.9%.

The strong job numbers have helped cushion the impact of high interest rates which has also kept inflation stubbornly high, and that has lowered rate-cut expectations. According the CME’s FedWatch, the markets have priced in a 0.25% rate cut in September at 51%, compared to 40% just one week ago, with a 99% probability that the Fed will hold rates at this week’s rate meeting.

USD/CAD Technical

There is resistance at 1.3801 and 1.3837
1.3732 and 1.3696 are the next support levels

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Continue Reading