Forex: USD/CAD drops on Canadian employment data outperforming US
_iNVEZZ.com: Friday, February 7th:_ In the fallout of labour market data from Canada and the US today, the Canadian dollar rose against its US counterpart and the USD/CAD fell 0.95 percent to a 16-day low, at 1.0966.
Statistics Canada reported that Employment Change showed a rise of 29,400 jobs in January and that the Unemployment Rate fell to seven percent last month from its prior level of 7.2. Analysts had expected 19,700 jobs to be added and unemployment to drop to 7.1 percent.
Higher hiring may boost consumer spending and raise inflation. The Canadian dollar dropped 4.5 percent last month as the Bank of Canada induced speculation for a cut in interest rates, saying that inflation would decline below the bank’s target this quarter.
Today’s releases are “suggesting there’s not bad momentum in the economy, sufficient to keep pushing the unemployment rate down and that should push inflation higher,” Royal Bank of Canada assistant chief economist Paul Ferley says. “It’s not the kind of environment where the Bank of Canada needs to cut rates,” he adds.
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Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce (CIBC) says that “the numbers, particularly the bounce-back in full-time employment, suggest those that were anticipating immediate action and a response from the [central] bank certainly are on the defensive.” CIBC wasn’t really thinking “the bank would cut, but clearly the market has been taking those thoughts seriously”, Stretch added.
The US Bureau of Labor Statistics said that Non-Farm Payrolls came in at 113,000 in January, a rise from the prior 75,000, but not good enough for the currency market as analysts had predicted a rise to 185,000. The delay in job creation may boost concerns about the steady recovery of the economy. Similar concerns may also lead to a rethinking of the current monetary strategy of the US central bank.
The good news for the US economy was the drop in the Unemployment Rate to 6.6 percent last month from the prior 6.7.
At the moment, the USD/CAD is trading at 1.1014.
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