As though the central bank decisions and U.S. non-farm payrolls report aren’t enough to rock the forex market this week, Canada is gearing up to release its latest jobs figures on Friday as well! Here’s why the report matters, what might happen, and how it could affect the Loonie.
Why is this report important?
Just like the U.S. NFP release, the Canadian jobs report has two main components: the employment change figure and the jobless rate. The former measures the change in the number of employed people from the previous month and as such, it indicates whether jobs were gained or lost in that period.
Meanwhile, the jobless rate shows the percentage of the labor force that is unemployed or is actively seeking employment.
Labor market indicators are important because these give early signs on how consumer confidence and spending might fare. In turn, changes in consumer behavior typically affect business production and investment, which also contribute to overall economic growth. The economy’s performance then determines if the central bank needs to make any monetary policy adjustments.
What is expected?
For the month of August, the Canadian economy is expected to have added 10.3K jobs, which might be enough to keep their jobless rate steady at 7.0%. This would be a weaker pace of jobs growth compared to July’s 41.7K gain in hiring, which brought the unemployment rate down by a notch from 7.1% to 7.0%.
Underlying labor market indicators, such as wage growth and participation rate, might also draw attention since major central bankers have recently discussed the importance of these figures during the latest Jackson Hole Summit. Quarterly labor productivity is up for release and it is expected to show a 0.1% rebound for Q2, which would reflect greater worker efficiency.
How could the report affect the Loonie?
Since the Canadian jobs report is scheduled to be released at the same time as the U.S. NFP, it is likely that the latter will steal the show when it comes to USD/CAD price action. Bear in mind though that stronger than expected jobs data from Canada could still lead to significant rallies for the Canadian dollar against other major currencies so it might be worth watching the Loonie forex crosses if you’re planning to trade this particular report.
Apart from that, this labor report might set the tone for longer-term Loonie forex trends. After all, the BOC is currently in a neutral stance, which suggests that clearer economic clues could wind up pushing policymakers to take either a more dovish or more hawkish bias.
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