Friday’s focus will be on job numbers, with both Canada and the US releasing employment reports for June. Canada is expecting a modest gain of 23,500 new jobs, down from the 39,800 gain in May. With the unemployment rate forecast to remain unchanged at 5.1%, the US numbers could prove to be more interesting to investors.
US nonfarm payrolls used to be hotly anticipated as one of the most important indicators, but NFP has taken a step back as inflation and Fed rate policy have become the main focus of the markets. Still, tomorrow’s NFP could be a market-mover, as investors may rely on it for guidance on the health of the US economy.
Investors are hearing the “R” word bandied around more often, as fears of a recession in the US are rising. The economy showed negative growth in the first quarter, and another quarter of contraction would officially signify a recession. If NFP misses expectations, investors could view it as a sign that the economy is losing steam. That could well make the Fed ease up rate hikes and push the US dollar lower. The consensus for NFP stands at 275,000, after a gain in May of 390,000.
Canada has not been immune from soaring inflation, as headline CPI rose to 7.7% in May, its highest level since January 1983. Similar to the Federal Reserve, the Bank of Canada has scrambled to tighten policy in order to wrestle down inflation, which has become the central bank’s public enemy number one. There are expectations that the BoC may follow the Fed’s lead and deliver a super-size 0.75% rate hike at its July 12th meeting. Inflationary pressures are broad-based across the economy, which raises the risk of inflation and inflation expectations becoming entrenched, something the BoC is keen to avoid.
((0|USD/CAD}} Technical
- 1.3038 is a weak resistance line. Above, there is resistance at 1.3109
- USD/CAD has support at 1.2961 and 1.2813
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