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  • Weekly Commentaries

Canada post Astronomically high Job Growth

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  • Last week's week saw a strengthening of the CAD against the USD. US employment figures were less than anticipated but in line with predictions. Data on average hourly earnings for December suggest that Fed policymakers, who have been worried that the tight labor market is causing inflation, should be less concerned. Canada, on the other hand, posted astronomical employment figures (+104k in December) and a decrease in the jobless rate. The market is pricing in a 25 bps hike at the end of the month with a probability of about 75%, despite pricing reflecting some easing of Fed rate hike expectations for the month of February.
  • In the coming week, slower US wage growth may make the likelihood of a 1/4-point raise by the FOMC in early February more obvious. At the end of the month, BoC policymakers will have to take into account growing core inflation, high wages, and tight labour markets, increasing the possibility that they will raise interest rates by 1/4 of a point. A flat to slightly lower trading range between 1.3375 and 1.3695 is predicted by weekly models for the upcoming week. Although the bottom end of that range is unattainable without a major increase in risk appetite, the upper zone of that range appears to be solid.
  • This week, there aren't many noteworthy economic reports from Canada. The domestic housing market's downturn should be reflected in both building permits and existing home sales. Headline prices are expected to remain unchanged in the month, clipping the y/y pace of growth to 6.6% (from 7.1% in Nov). Headline prices are expected to remain unchanged in the month, clipping the y/y pace of growth to 6.6% (from 7.1% in Nov). Flat headline prices in Dec should set CPI up for a further deceleration in the next few months. A soft CPI print will be a plus for the CAD and a negative for the USD. There are a number of Fed speakers this week as well.
  • The current expected trading range for the week 1.3375 -1.3695.
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