The Canadian dollar is trading quietly in the European session. Currently, USD/CAD is trading at 1.2505, up 0.51%.
Canada job data sends lifts loonie
The Canadian dollar ended the week on a high note, courtesy of excellent June employment data. The economy created 231 thousand jobs, smashing past the consensus of 175 thousand. This was a strong rebound from May, which disappointed with a reading of -68.0 thousand. What is particularly encouraging is that the economy has recovered most of the jobs which were lost due to Covid. As expected, the unemployment rate fell to 7.8%, down sharply from the previous reading of 8.2%.
The strong employment numbers are unlikely to change the stance of the Bank of Canada, which holds its policy meeting on Wednesday. An ING report said that the BoC will continue to taper its QE programme and will shut down bond purchases by the end of 2021, with rate hikes to follow in the second half of 2022. The report added that inflation is higher than the BoC target and the economy is on an “encouraging growth path”.
The BoC was the first major central bank to scale back bond purchases and is expected to taper for a third time on Wednesday, reducing weekly purchases from 3 billion dollars to 2 billion dollars. Tighter policy is bullish for the Canadian dollar, which could also receive a lift this week from strong oil prices.
The Canadian dollar has received a boost from higher oil prices, but the recent collapse of OPEC+ talks could lead to a fall in oil prices if producers decide to flood the market in order to grab more market share. The group usually finds a way to overcome internal disagreements, and the expectation that a compromise will be reached between Saudi Arabia and the UAE has supported oil prices.
- USD/CAD faces resistance at 1.2594. Above, there is resistance at 1.2735
- On the downside, there is support at 1.2306. Below, there is support at 1.2161