The Canadian dollar is steady at the start of the week. USD/CAD is trading at 1.4385, up 0.06% on the day. The Canadian dollar declined 0.50% on Friday after Canada’s job report was weaker than expected.
Canada’s Job Growth Grinds to a Halt
Canada’s economy gained only 1.1 thousand jobs in February, well short of the market estimate of 20 thousand and following a strong gain of 76 thousand in January. The labor market showed a burst of hiring over the past three months but fell flat in February as full-time employment fell by 19.7 thousand. On the bright side, the unemployment rate held steady at 6.6% for a third straight month, below the market estimate of 6.7%.
The soft jobs report could be a reflection of growing uncertainty over US tariffs threats, which has hurt business confidence. The US has imposed tariffs against Canada but announced a 30-day suspension on tariffs on automobiles covered by the North American free trade agreement (USMCA). Canada has retaliated with counter-tariffs but the Canadian economy is very dependent on the US and a protracted trade war would tip the weak Canadian economy into a recession.
For the Bank of Canada, Friday’s weak employment report reinforces the case for the Bank of Canada to raise rates at the rate meeting on March 12. The rate cut odds have jumped to 87%, up from 50% in early March. The central bank finds itself in a difficult position as inflation remains sticky while US trade policy could lead to an economic downturn.
US Nonfarm Payrolls Edge Higher
In the US, nonfarm payrolls rose to 151 thousand in February, up from a downwardly revised 125 thousand in January but shy of the market estimate of 160 thousand. The unemployment rate rose to 4.1% from 4%. The jobs report was decent, but the threat of US tariffs continues to cloud the economic outlook.
USD/CAD Technical
- USD/CAD is testing support at 1.4362. Below, there is support at 1.4298
- 1.4445 and 1.4509 are the next resistance lines
