HomeContributorsFundamental AnalysisCanadian Dollar Unchanged ahead of Key Job data

Canadian Dollar Unchanged ahead of Key Job data

The Canadian dollar is unchanged in the Friday session. In the North American session, USD/CAD is trading at 1.2919, down 0.02% on the day. On the release front, there are key employment indicators on both sides of the border. Canadian employment change is expected to rebound with a strong gain of 25.0 thousand. The unemployment rate is forecast to edge lower to 5.9%. Over in the U.S, the markets braced for some soft numbers. Nonfarm payrolls is expected to fall from 201 thousand to 185 thousand, while wage growth is forecast to drop from 0.4% to 0.3%. The unemployment rate is expected to drop from 3.9% to 3.8%. Traders should be prepared for some volatility from USD/CAD during the North American session.

The Federal Reserve remains on track to deliver a rate hike in December, after raising rates at the September meeting. Currently, the likelihood of a December rise is pegged at 80%, according to the CME Group. The Fed has reiterated that it will continue its policy of gradual rate hikes, and is expected to raise rates three more times in 2019. This has put considerable pressure on the Bank of Canada to follow suit and also raise interest rates. With the BoC holding its next policy meeting on October 25, policymakers will be carefully monitoring Friday’s employment change reading – a strong gain in new jobs would likely boost the odds of a rate hike in October and also propel the Canadian dollar higher.

Fed Chair Jerome Powell had a hawkish message for the markets on Wednesday. Powell said that interest rates were still accommodative, but were “gradually moving to a place where they will be neutral”. Powell said that extremely accommodative low interest rates were no longer needed, since the economy has strengthened. The hawkish comments helped push the U.S dollar higher on Wednesday. Analysts have noted that there is no precise definition of a neutral rate, but the Fed tends to use the 3 percent level as its yardstick. With the Fed expected to continue its gradual increase in rates, this level could be reached in 2019.

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