The Canadian dollar is almost unchanged to start the week. In Monday’s North American session, USD/CAD is trading at 1.2832, up 0.03% on the day. On the release front, there are no Canadian releases on the schedule. In the US, JOLTS Job Openings is expected to to drop to 6.03 million. On Tuesday, the US releases PPI, an important inflation indicator.
The markets continue to digest Friday’s US employment numbers, which were a mix. Nonfarm Employment Change softened in November, but the reading of 228 thousand easily beat the estimate of 198 thousand. However, Average Hourly Earnings, which measures wage growth, came in at 0.2%, shy of the estimate of 0.3%. Analysts remain stumped as to why wages remain stubbornly low, given a red-hot labor market which is running at full capacity. On an annual basis, wages rose 2.5%, short of the forecast of 2.7%. The Fed is also concerned with the lack of wage growth, and this could have a significant effect on monetary policy – if wage growth and inflation shows improvement in 2018, the Fed could raise rates up to three times in 2018.
Canadian housing indicators continue to impress. On Friday, Housing Starts in November jumped to 252 thousand, well above the estimate of 214 thousand. This marked the strongest reading since March. On Thursday, Building Permits posted a strong gain of 3.5%, crushing the forecast of 1.7%. Meanwhile, the Bank of Canada did not pull any surprises and maintained the benchmark rate at an even 1.00%. The BoC is casting a worried look at NAFTA, as a protectionist-minded US administration has threatened to torpedo the free-trade agreement unless Canada and Mexico make major concessions. An additional headache for the BoC is that the Federal Reserve is expected to raise rates in December and January. The BoC will have to follow suit with a raise of its own, or watch the Canadian dollar head lower against the greenback.
