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Canada won’t see any top-tier release until the parade on Friday when we’ll see Canada’s labour market numbers and trade balance (12:30 pm GMT) as well as the IVEY PMI (2:00 pm GMT) reports.

Friday data dump

A net of 7,500 workers lost jobs in April instead of gaining a net of 17,000 as many had expected. Luckily for the Loonie, traders were more interested in wage growth, which still pointed to a hawkish bias from the BOC.

This week analysts are expecting to see a net gain of 24,000 jobs made in May while the unemployment rate sticks to its 5.8% reading.

Next is Canada’s trade numbers, which showed a narrower trade deficit back in April. But like in the jobs report, traders had focused on another catalyst that actually dragged the Loonie lower despite the upside surprise.

Market players see a 2.05B CAD deficit this time around, which is a bit wider than last month’s 1.90B CAD deficit. Will the bulls and bears pay more attention to the numbers now that the U.S. is heating up its “negotiations” against its major counterparts?

Last but definitely not the least is the closely-watched IVEY PMI report. Unlike in the reports above, Loonie traders actually reacted accordingly and sold the comdoll when it dropped from 71.5 to 62.5 in April.

This time around traders expect to see an improvement to 63.2. Given how this is one of the last major catalysts scheduled for the week, it’s likely that we’ll see the traders’ reaction to the report dictate how the Loonie trades until the end of the busy week.

Last Week’s Price Review

The Loonie is finally on the winning side after six consecutive weeks of net losses. Moreover, the Loonie managed to outpace the Greenback and the euro and is currently the best-performing currency of the week (as of 5:00 pm GMT).

Overlay of CAD Pairs & Crude Oil (Black Line): 1-Hour Forex Chart
Overlay of CAD Pairs & Crude Oil (Black Line): 1-Hour Forex Chart

After decoupling from oil prices last week, it’s quite apparent that the Loonie was taking directional cues from oil prices this week.

It’s worth pointing out, though, that oil prices started climbing on Tuesday but the Loonie was reluctant to follow oil prices higher.

And as pointed out in Tuesday’s London session recap, that’s because the rise in oil prices was partly attributed to supply problems over at Canada, which is actually bad news for Canada and the Loonie.

Aside from the rise in oil prices, the Loonie was also affected by BOC Guv’nah Poloz’s speech.

As for details, you can check out Forex Gump’s Central Bank Roundup. The short of it, though, is that Poloz expressed some concern about the housing market and trade during his speech. And the dovish vibes from his speech caused the Loonie to tank across the board.

However, Poloz had a noticeably hawkish tone during the Q&A portion after his speech. Poloz even basically said that the Canadian economy is evolving within expectations when he said that:

“It might be worth reminding you that data point for the first quarter, was exactly, to the decimal point, exactly what we forecast in the April MPR (Monetary Policy Report), which is quite reassuring in the sense that underlying appears to be correct. And inflation is exactly on target as we expected.”

And since the Canadian economy is evolving as expected, Poloz concluded that:

“Given where the economy is we are in a situation where the economy will warrant higher interest rates. We will ensure that is a gradual process.”

And that hawkish conclusion likely helped to raise expectations for a rate hike this July since the Loonie found support and then began to trade broadly higher even as oil traded roughly sideways.

The Loonie then continued to trend higher after, likely sustained by the rise in oil prices and Poloz’s hawkish remarks.

And as icing on the cake, Canada’s GDP report also printed a stronger-than-expected reading, which caused the Loonie to shoot higher as expectations for a July BOC rate hike jumped from 67% to 80%, market analysts say.