Canadian Dollar (CAD) Exchange Rate Tumbles as US Employment Jumps
The Canadian Dollar has been putting in a patchy performance over the last five days and as another week comes to an end the ‘Loonie’ is softer against the US Dollar and little changed against the Pound.
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The commodity driven currency slid against its rivals yesterday following the release of disappointing Canadian manufacturing data, and the CAD/USD pairing edged lower still after the US unemployment rate was shown to have dropped to its lowest level since 2008.
In an afternoon devoid of Canadian data, currency market volatility was almost wholly inspired by the surprisingly upbeat US report.
Economists had anticipated that US employment would increase by 218,000 but it actually surged by 288,000 in April, driving the unemployment rate to 6.3 per cent from 6.7 per cent.
The impressive US report met this response from senior economist Russell Price; ‘The economy really has strong underlying fundamentals supporting its growth. Temporary headwinds such as the bad weather can be certainly managed.’
Although there were dimmer aspects to the US data (such as the US participation rate falling at 800,000 people left the workforce) the report still highlighted the divergence between US and Canadian economic performance.
The CAD/GBP pairing also weakened on Friday as the Pound was lifted by the UK’s brighter economic prospects. Although today’s UK construction PMI showed a steeper-than-forecast decline, reports indicate that the nation continued to enjoy a reasonable pace of expansion as the second quarter got underway.
This week has been fairly light on Canadian data, and while there isn’t exactly a flood of domestic reports due out next week, there are some figures to keep an eye on.
On the 6th Canada will publish its Ivey Purchasing Managers Index for April. The measure came in at 55.2 last month, above the 50 mark separating growth from contraction. Investors will be hoping for another positive result.
On the 7th Canadian building permits figures will be released, followed by domestic housing starts and new housing price index.
The employment data published on the 8th however will have the most impact on the CAD exchange rate.
The Canadian unemployment rate came in at 6.9 per cent in March following an employment increase of 42,900.
As the March employment gain was considerably stronger than forecast, any negative correction in the April figures could drag the ‘Loonie’ lower against its peers.
The Canadian Dollar is trading against the Pound in the region of 0.5408 and against the US Dollar in the region of 0.9105