The Canadian dollar is almost unchanged on Friday. USD/CAD is up 0.03%, trading at 1.3680 in the European session at the time of writing.
Canada’s Job Growth Expected to Rebound
Canada will release the April employment report later today. The economy shed 2200 jobs in March, a shocking figure as the market forecast stood at a gain of 25,900. Job growth is expected to get back on track, with an estimate of 18,000. The unemployment rate has been high and is expected to creep up to 6.2%, compared to 6.1% in March. Wage growth, an important driver of inflation, is expected to tick lower to 4.9% in April, down from 5% in March.
The Bank of Canada has kept rates unchanged at 5% for a sixth straight time at the April meeting and is under pressure to ease rates as inflation falls lower. The BoC remains cautious, however, as policymakers are reluctant to lower rates before they are confident of sustainable price stability around the 2% inflation target. At the press conference after the April announcement, Governor Macklem said that a June rate cut was “within the realm of possibilities”, which wasn’t much of an endorsement.
The BoC would prefer not to cut before the Federal Reserve, since that would push the Canadian dollar lower and likely boost inflation. At the same time, the BoC is under pressure to ease the pain of households that have been hit hard by elevated rates and will likely press the rate trigger ahead of the Fed if it feels that inflation is low enough.
It’s a light data calendar in the US, with UoM Consumer Sentiment as the sole tier-1 event. The index is expected to drop to 76.0 in May, down from 77.2 in April.
USD/CAD Technical
- USD/CAD is putting pressure on resistance at 1.3699. Above, there is resistance at 1.3723
- 1.3651 and 1.3627 are providing support