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Sudden Increases In Canadian And U.S. Employment

ByThe National Bank of Canada
Published 03/12/2013, 07:13 AM
Updated 05/14/2017, 06:45 AM

Last week was very newsworthy, given all the economic data released and the market events. On Wednesday, Mark Carney, the outgoing Governor of the Bank of Canada, softened his tone slightly, saying that rates will not rise for some time. We should recall that, less than a year ago, a rate increase appeared imminent. On Friday, everyone was taken by surprise by sudden increases in Canadian and U.S. employment statistics: 50,700 jobs were created in Canada (vs. 8,000 forecast) and 236,000 jobs were created in the U.S. (vs. 165,000 forecast). The Loonie rose on the news, climbing 60 basis points against the greenback, but we believe that this drop in the USD/CAD will be temporary. By mid-afternoon on Friday, the Fitch ratings agency had downgraded Italy’s credit rating, citing election results - or rather “inconclusive election results”- for the decision.

Forecast Previous
The Loonie

“The best way to predict the future is to create it.”Peter Drucker

February proved to be the best month for the U.S. dollar (USD) in close to a year, as it appreciated 3.5% relative to a basket of currencies of its trading partners. The greenback rose due both to the inability of U.S. elected officials to reach an agreement to avoid automatic spending cuts and the expected political deadlock in Italy given the results of recent elections. As a result of worsening economic data in Canada and a change of tone at the Bank of Canada, the loonie (CAD) was unable to hold its own against a rising USD. Speculators also weakened the Canadian dollar by shorting it. All of this occurred in a context of greater volatility for the CAD. What does the future hold? What course is the loonie likely to take over the next few quarters?

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