Forex Jobs Matchup: U.S. vs. Canada

The U.S. and Canada must be feeling the Christmas spirit since I’m seeing a lot of green and red in their latest jobs reports. Let’s take a closer look at the November employment numbers to find out what these could mean for the forex trends of the Greenback and the Loonie.

United States

  • Nov. non-farm employment change at 211K vs. 201K forecast
  • Oct. non-farm employment change upgraded from 271K to 298K
  • Unemployment rate steady at 5.0% in Nov.
  • Average hourly earnings up by 0.2% as expected

All green for Uncle Sam! The November NFP printed stronger-than-expected readings, along with a total of 35K in positive revisions to previous releases. Hiring gains were seen across most sectors, except for mining and information.

Meanwhile, the unemployment rate held steady at its record low of 5.0% even as the participation rate picked up from 62.4% to 62.5% to indicate that Americans are rejoining the labor force to resume their job hunt. Wage growth was also evident, as average hourly earnings increased by 0.2% as expected, slightly slower than the previous month’s 0.4% rise.

But, as Pip Diddy noted in his weekly forex recap, the U.S. dollar’s bullish reaction to the jobs release was muted, possibly because Fed rate hike expectations have been priced in for quite some time and also because the upbeat report brought risk appetite back to the table. With that, investors felt more confident to put their money in higher-yielding currencies and assets, which explains why U.S. equity indices such as the S&P 500 or Nasdaq closed more than 2% higher that day.

Canada

  • Nov. employment change at -35.7K vs. -9.7K expected
  • Unemployment rate rose from 7.0% to 7.1% instead of holding steady
  • Average compensation per hour worked in Q3 down by 0.4%

In contrast, Canada’s jobs numbers all came in weaker than expected, with the economy losing 35.7K jobs in November versus the projected 9.7K decline. This was enough to bring the unemployment rate up from 7.0% to 7.1%.

Components of the November employment report confirmed that the job losses were mostly spurred by the reduction in those part-time positions from the previous month. (Ha! Told you so!)

As expected, the public administration sector led the declines in hiring, as roughly 30K election-related positions were vacated. Other industries such as wholesale and retail trade, information, culture, and recreation saw declines while the manufacturing and natural resources sectors managed to post feeble gains.

However, as I mentioned earlier, forex traders seemed to be in a risk-on mood that day, cushioning the higher-yielding Canadian dollar from larger losses even with a downbeat jobs release. Besides, most market players have also priced in their expectations for Canada’s jobs report, leaving the Loonie to be more sensitive to the OPEC announcement.

USD/CAD Forex Reaction

USD/CAD 15-min Forex Chart

USD/CAD 15-min Forex Chart

As you’ve probably guessed, USD/CAD simply tossed and turned around but was unable to establish a clear direction that day. Price popped higher during the actual releases but barely made its way past the 1.3400 handle before profit-taking ensued.

For now, USD/CAD seems to be content with staying safely inside its range, although the path of least resistance might still be to the upside. Do you think we’ll see a break higher soon?