USD/CAD: A Tale Of Two Labor Markets
Traders are still trying to digest last week’s US jobs report, but one thing is clear that The US labor market is outperforming Canada’s labor market.
Markets are starting to settle into the traditional “Dog Days of Summer” trade, major indices, commodities and currency pairs seeing relatively little movement on the day ahead of tomorrow’s highly expected UC CPI report.
Traders are still trying to digest last week’s US jobs report, but one thing is clear: The US labor market is outperforming Canada’s market. Whereas the US just saw its strongest job growth in five months, a new revolving low in its unemployment rate, and has fully recovered all of the job losses since the start of the pandemic, Canada has now seen two consecutive months of outright declines in full-time employment.
Central banks world wide remained hyper-focused on inflation, but an outright contraction in employment, especially against a backdrop of falling commodity prices and a slowing global economy, could certainly prompt some to slow or pause their tightening cycles. This now is the reality that the BOC has to wrestle with, presenting a possible bullish catalyst for the US dollar relative to the loosie.
A break below last week’s low and the 100-day EMA around 1.2820 could erase the near-term bullish bias and leave the outlook for the North American pair more confusing ever.