Talking Points:
– May Canadian jobs growth comes in at -7.5K, well below the expectation of +23.5K.
– Despite the drop in jobs, the unemployment rate stayed on hold at 5.8%.
– The Canadian Dollar turned lower following the data, with USD/CAD rising from 1.2979 to as high as 1.3073, at the time this report was written.
See our longer-term forecasts for the US Dollar, Euro, British Pound and more with the DailyFX Trading Guides
The latest jobs update from the world’s eleventh largest economy has proven to be a disappointment for the Canadian Dollar. The Canadian economy lost -7.5K jobs last month, the second consecutive month of a negative payrolls figure and the third month out of five overall in 2018 that has seen jobs lost.
On balance, Canada has seen the economy lose -48.9K jobs this year, an average of -9.8K per month.
Other aspects of the report were mixed as well. The unemployment rate stayed on hold at 5.8%, but that was largely driven by an unexpected drop in the participation rate, which slipped to 65.3%; without the reduction in the labor pool, the unemployment rate would have otherwise risen in May. Elsewhere, perhaps the silver lining of the report, wage growth accelerated sharply to +3.9% y/y.
Here are the full data moving the loonie this morning:
– CAD Unemployment Rate (MAY): 5.8% as expected unch
– CADNet Employment Change(MAY): -7.5K versus +23.5K expected, from -1.1K
– CAD Labor Force Participation Rate (MAY): 65.3% versus 65.5% expected, from 65.4%
– CAD Hourly Earnings Permanent Employees(MAY): +3.9% versus +3.2% expected, from +3.3% (y/y)
See the DailyFX economic calendar for Friday, June 8, 2018
USD/CAD Price Chart: 1-minute Timeframe (June 8, 2018 Intraday) (Chart 1)
Following the release of the data, USD/CAD was able to quickly rally from 1.2979 to as high as 1.3073. But with the unemployment rate staying on hold and wage growth jumping, traders have been quick to bet that the odds of 25-bps rate hike by the Bank of Canada over the coming months has increased: markets are now pricing in a 78% chance of a move in July, up from 71% yesterday.
Accordingly, the rise in the implied probability of a BOC rate hike next month has helped the Canadian Dollar recover some of its losses; USD/CAD was trading at 1.2992 at the time this report was written.
Read more: US Dollar Losing Streak Hits Four Days with G7 in Focus
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— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
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