• Sun. Jun 23rd, 2024

After US NFP Misses Expectations and Canada’s Employment Numbers Fail, the Canadian Dollar Forms a V-Shape

Leon Kramer

ByLeon Kramer

Jan 9, 2024

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  • The Canadian Dollar is trading within a wide range on NFP Friday.
  • Job growth in Canada falters, while the United States surpasses expectations with strong employment numbers.
  • Despite the disappointing labor figures, wage pressures in Canada continue to remain strong.

The Canadian Dollar (CAD) dropped to a fresh weekly low against the US Dollar (USD) before rebounding to reach a three-day high as market volatility ensues following a better-than-expected US Nonfarm Payrolls (NFP) report that exceeded market predictions. 

Canada witnessed a labor market that was severely limited in its ability to create new jobs, resulting in a number of job additions that fell within the range of statistical error. Additionally, there was a consistent increase in wages, reaching the highest level in two years.

Despite the Turbulence of the Canadian Dollar, Investors Are Struggling With the Nfp Print

  •     The US Nonfarm Payrolls have taken center stage, as they have contributed 216K net new jobs to the US employment scene in December, surpassing the projected 160K.
  •     In spite of the positive initial report, the data is still being heavily revised, resulting in a decrease from 199K to 173K for November’s figures, and an even steeper revision from 150K to 105K for October’s numbers.
  •     The US saw a slight increase in Average Hourly Earnings, rising from 4% to 4.1% for the year ending in December. Additionally, the Unemployment Rate in the US remained steady at 3.7% in December, defying market expectations of a slight increase to 3.8%.
  •     In contrast to the positive trend in US data, the US ISM Services Purchasing Managers’ Index (PMI) in December fell short of expectations, registering a modest 50.6 compared to the projected decrease from 52.7 to 52.6.
  •     On the Canadian side, the Unemployment Rate remained unchanged at 5.8%, defying the predicted 5.9%.
  •     The growth of Canadian average hourly wages experienced a significant surge, reaching a two-year high of 5.7% in December.
  •     Forecasts for the Canadian Net Change in Employment were way off, as Canada only saw a meager increase of 0.1K new jobs in December, compared to the predicted decline from 24.9K to 13.5K.
  •     The December Ivey PMIs in Canada continue to show positive results in the seasonally-adjusted figure, rising from 54.7 to 56.3. However, the non-seasonally adjusted PMI tells a different story, dropping from 53.2 to 43.7, reaching its lowest point in the past year. This decline can be attributed to cyclical factors.

After All Effort to Keep the Canadian Dollar, the USD/Cad Exchange Rate Settles Back Into the Middle Range

Today is a day where the Canadian Dollar is influenced by fundamental factors. The release of the NFP report caused an initial increase in the USD/CAD pair, pushing it towards 1.3400. However, the market quickly changed direction and dropped to 1.3290 before stabilizing around 1.3360.

In contrast to the US Dollar’s overall decline against most major currencies at the end of the week, the CAD is facing difficulty in attracting attention. It is performing worse than other major currencies, showing losses across the major currency bloc and a minimal 0.07% decrease against the Greenback.

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As the USD/CAD approaches the middle on Friday, there is a possibility of a temporary halt in the price movement. The pair is currently stuck below the 200-day Simple Moving Average (SMA) at the 1.3500 level, with the 50-day SMA showing a downward crossover with the longer moving average. 

By the end of Friday, the Canadian Dollar had experienced a decline of almost 0.9% against the US Dollar since Monday’s opening bids. It also saw a decrease of around 0.67% against the Pound Sterling and remained unchanged against the Euro throughout the week.

The Canadian dollar experienced a significant increase of 1.7% against the Japanese Yen over the course of the week. Additionally, it rose by half a percent against the Australian dollar and slightly more than a quarter of a percent against the New Zealand dollar.

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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