Last Week's Employment Data Surprisingly Positive, Boosts CAD

The employment data released last Friday were a surprise, not once but twice! The U.S. reported 146,000 new jobs in November, despite Hurricane Sandy’s negative impact on the U.S. job market. The unemployment rate fell to 7.7%, the lowest level in 4 years! In Canada, 59,000 jobs were created, including 55,000 full-time jobs. These excellent results have given a boost to the loonie. South of the border, legislators are still nowhere near a solution. Instead, the Republicans and the Democrats are taking turns passing the buck.

Canada
This stands to be an extremely light week in terms of major economic indicators in Canada. Last Friday, the federal government announced it allowed Chinese conglomerate CNOOC to buy Nexen, a Canadian oil company. This favorable decision is likely to send the loonie to new heights. Also today, Housing Starts figures will be released. Pundits estimate that there were 202K housing starts in November.

United States
The week begins tomorrow with Trade Balance data for October. Tomorrow will be the most important day of the week, with the Federal Reserve announcing its decision on its key interest rate. We do not believe that the Fed is about to change the rate, but we will nevertheless be listening closely during Ben Bernanke’s press conference. The Fed’s Operation Twist, implemented last year to lower long-term interest rates, will expire at the end of the month.

During his latest press conferences, Mr. Bernanke has stated that his priority is the unemployment rate. Given the U.S. employment data released on Friday, it remains to be seen whether the Chairman of the Fed will introduce a new quantitative easing program. On Thursday we will have Retail Sales data for November. A figure of 0,4% is expected. The week will end with the Consumer Price Index, expected to be 1.9% (YoY) on Friday.

International
In international news, market confidence is slowly starting to ebb. Over the weekend, Italian Prime Minister Mario Monti announced that he will leave office before the end of the month. Financial markets had confidence in Monti; it now remains to be seen whether his replacement will enjoy this same confidence. Today the eurozone will reveal its Sentix Investor Confidence Index, followed tomorrow by the release of the German ZEW Economic Sentiment Index. On Wednesday we will have Germany’s Consumer Price Index, followed by the Consumer Price Index for the eurozone on Friday.

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