The U.S. won’t be the only one printing labor market numbers this week! Here are catalysts to watch if you’re trading the Loonie in the next couple of days.
BOC Governor Poloz’ speeches
Tomorrow at 7:30 pm GMT Bank of Canada (BOC) Governor Stephen Poloz will share his two cents before the House of Commons Standing Committee on Finance in Ottawa.
The BOC head honcho will make another appearance on Wednesday at 8:15 am GMT, this time before the Standing Senate Committee on Banking, Trade, and Commerce.
If last week’s remarks are any clues, then we might see the BOC Chief rationalize why he and his team are hawkish enough to drop the word “gradual” from their forward guidance and say that every meeting going forward is a “live” one.
Labor market and trade balance reports (Nov. 2, 12:30 pm GMT)
A better-than-expected employment change report pushed the Loonie higher last month.
Of course, that was before traders noticed that most of the job gains were from part-time jobs, and that full-time employment and wages actually edged lower in September. The Loonie ended up falling so sharply that it erased most of its intraweek gains against its counterparts!
This week analysts are looking for a net addition of 10,000 jobs in October much lower than the 63,300 net gains seen in September. The unemployment rate is expected to maintain its 5.9% reading, however.
But wait, there’s more! Aside from labor market numbers, Canada will also print its trade data for the month of September. This time, market geeks expect to see a 0.30B CAD surplus after a 0.53B reading in August.
Before you plan your trades around the trade release, however, take note that both Canada and the U.S. will print their labor market numbers at the same time as the trade balance report.
That means that reactions to Canada’s trade activity could get lost in the hullaballoo around the other top-tier releases!
Last Week’s Price Review
The Loonie is the second top-performing currency of the week (as of 5:00 pm GMT), which is a reversal of fortune since the Loonie limped to the finish in second-to-last place last week.
This week’s win will also put an end to two weeks of net losses for the Loonie. And the Loonie’s good run this week is thanks to the BOC statement.
The Loonie took directional cues from oil prices, but only did so during the later half of the week.
In fact, the Loonie began attracting buyers right from the get-go, so much so that most CAD pairs stayed above last week’s closing prices (dashed, horizontal line) in the run-up to the BOC statement.
Speaking of the BOC, the BOC hiked the Overnight Rate as expected, but the BOC also presented a rather optimistic picture because of the renegotiated NAFTA deal (a.k.a. USMCA).
More importantly for rate hike junkies, the BOC also signaled that there will be more rate hikes to come while also tweaking its language a bit to sound more hawkish.
And for comparison, here’s the BOC’s forward guidance during the September BOC statement (emphasis mine):
“Recent data reinforce Governing Council’s assessment that higher interest rates will be warranted to achieve the inflation target. We will continue to take a gradual approach, guided by incoming data. In particular, the Bank continues to gauge the economy’s reaction to higher interest rates.”
And here’s the BOC’s forward guidance during this week’s BOC statement (emphasis mine):
“Governing Council agrees that the policy interest rate will need to rise to a neutral stance to achieve the inflation target. In determining the appropriate pace of rate increases, Governing Council will continue to take into account how the economy is adjusting to higher interest rates, given the elevated level of household debt.”
As you can see, the BOC dropped the word “gradual” from its forward guidance while also opening the door for future rate hikes, with the only question being the “appropriate pace of rate increases.”
Even better, BOC Boss-Man Poloz said during the presser that every meeting was live while also characterizing the BOC’s monetary policy in a rather hawkish manner when he said the following:
“The reality is that the economy is at its capacity and is no longer needing stimulus. And so it’s our job to prevent the thing from overheating and creating inflation pressures down the road.”
Poloz did try to present the removal of the word “gradual” in a more neutral light when he said the following, though:
“It does permit the flexibility to move at a faster pace, but it would be completely hypothetical, depending on the data. And so it also permits us to go at a slower pace if the data suggest.”
Overall, however, the BOC’s message was rather hawkish, so the Loonie tried to soar even higher.
However, oil prices were slumping so CAD bulls were eventually forced to throw in the towel.
Oil prices would recover on Thursday, though, and the Loonie initially tracked oil prices higher.
However, CAD pairs began turning broadly lower at around 11 am GMT on Thursday.
There were no apparent catalysts, so market analysts blamed the Loonie’s slide on profit-taking since the Loonie’s bullish reaction to the BOC was seen as supposedly overdone already.
Anyhow, the Loonie began tracking oil prices again come Friday, so the Loonie initially shed more gains (except against AUD and NZD) when oil prices slipped, but turned broadly higher when oil also climbed higher.