It’s time for another jobs report from Canada!
Here’s what you need to know if you plan on trading this major event.
Event in Focus:
Canada’s June Employment Data: Employment Change, Unemployment Rate
When Will it Be Released:
August 4, 2023 (Friday) 12:30 pm GMT
Use our Forex Market Hours tool to convert GMT to your local time zone.
Expectations:
- Net of 24.4K jobs added in July, following earlier 59.9K gain in June
- Unemployment rate to tick higher from 5.4% to 5.5%
Relevant Data Since Last Event/Data Release:
-
S&P Global manufacturing PMI remained in contraction for July, as the “uncertain business climate” led employment to be “cut for a third month in a row, with firms tending not to replace
leavers at a time of insufficient new orders”
Previous Releases and Risk Environment Influence on the Canadian Dollar
July 7, 2023
Event Results / Price Action:
Canada’s June jobs report turned out better than expected as the economy added 59.9K jobs during the month versus the projected 5K gain and the earlier 17.3K decline.
The unemployment rate ticked higher from 5.2% to 5.4% but components of the figure revealed that this was mostly due to more folks returning to the labor force to pursue job opportunities.
The Loonie was actually off to a rough start for the week, as the Canadian manufacturing PMI reflected industry contraction while traders priced in a strong U.S. jobs report.
Although the Canadian dollar popped higher upon seeing upbeat employment data, the gains were cut short by a weaker than expected Ivey PMI figure.
Risk Environment and Intermarket Behaviors:
Crude oil was off to a positive start early in the week, following the surprise output cuts announced by Saudi Arabia over the weekend. Unfortunately the correlated Loonie was barely able to take advantage, as traders seemed on edge about higher global borrowing costs.
Risk-off flows accelerated when the U.S. and China printed downbeat PMI readings, followed by relatively hawkish FOMC minutes, spurring recession jitters and weighing on commodity currencies.
June 9, 2023
Event Results / Price Action:
Canada printed a surprisingly downbeat jobs figure for May, as the economy shed 17.3K jobs during the month instead of posting the projected 21.2K increase. This brought the jobless rate higher from 5.0% to 5.2%, outpacing the 5.1% consensus.
This forced the Loonie to return its post-BOC gains from earlier in the week, even after the central bank made a hawkish decision to hike rates by 0.25% and keep the door open for more tightening moves.
Risk Environment and Intermarket Behaviors:
Voluntary output cuts announced by the OPEC+ over the weekend paved the way for a bullish start for the oil-related Loonie this trading week.
However, resurfacing recession fears soon erased oil price gains and dragged the Canadian currency down with it ahead of the jobs release. Fortunately risk assets managed to pull a bit higher on Friday when risk sentiment improved thanks to upbeat Chinese banking developments.
Price action probabilities:
Risk sentiment probabilities:
Mixed PMI data from China, followed by expectations of a less-aggressive pace of tightening among major central banks, has been positive for overall market sentiment earlier this week.
However, the rallies slowed when Fitch downgraded the U.S.’s long-term ratings to ‘AA+’ from ‘AAA’ and led traders to reconsider the persistent risks to global growth.
Also don’t forget that the U.S. July NFP report is up for release at exactly the same time as Canada’s jobs print, so the Loonie might also be extra sensitive to dollar price action then. Later on, the Ivey PMI release would likely impact CAD movements before the week comes to a close.
Canadian Dollar scenarios:
Potential Base Scenario:
Leading indicators are hinting at another slow month in hiring, possibly reinforcing the view that the BOC could sit on its hands for much longer and join the likes of the ECB and RBA in shifting to a more neutral stance.
If risk aversion remains in play ahead of the actual jobs release, a weak print could trigger a wave lower for the Canadian dollar, particularly against safe-havens or lower-yielders like USD, JPY, and CHF.
An upside NFP surprise might bring even more gains for the Greenback versus the Loonie thanks to expectations of Fed tightening and risk-off flows on recession fears.
Potential Alternative Scenario:
A significant upside surprise for the Canadian jobs report could reassure traders that the economy remains resilient and could continue to maintain strength in the labor market.
In that case, traders could reignite hopes for a BOC hike in their next policy decision and possibly spur a Loonie rally, especially if the Ivey PMI numbers align.
There could be opportunities to buy CAD against currencies whose central banks are opting to slow down their pace of tightening or pause altogether (EUR, NZD, AUD).
