CAD Saved By The Jobs Reports After The BOC Hits It Hard

This was the week: BOC changes its mind, oil, jobs

The Bank of Canada all but removed its hawkish bias. After having a clear bias in favor of raising rates, the BOC now seems reluctant to make any moves this year. The global slowdown and a weak Canadian economy in Q4 caused the change of heart.

However, not all parts of the economy are looking weak. The labor market surprised once again with Canada gaining no less than 55.9K positions. Moreover, wages continued their recovery by accelerating to 2.25% in February after stabilizing at 1.82% in January. The two consecutive rises come after months of deceleration. And while the unemployment rate remained unchanged at 5.8%, the participation rate leaped to 65.8%. And, the composition of jobs was clearly skewed in favor of full-time positions.

The loonie still ended the week lower also due to the fall in oil prices. A jump in US inventories of crude oil triggered a belated reaction. Correction after the rises is probably another reason for the slide.

In the US, the Non-Farm Payrolls fell short of expectations with an increase of only 20K jobs but wage growth accelerated to 3.4% YoY and the various unemployment rates slipped. The ISM Manufacturing PMI and New Home Sales also beat expectations.

Trade talks between the US and China continue, but a meeting between Presidents Donald Trump and Xi Jinping has yet to be scheduled and this weighs on the mood. In addition, China set low growth targets and the ECB went in the footsteps of the BOC and other central banks, turning dovish. The pressure on stocks was also felt in risk currencies such as the loonie.

Canadian events: Watch the USMCA ratification and Wilkins

A light Canadian calendar means that the emphasis is on other events. The new trade agreement, the USMCA, will finally make its way to the US Congress for ratification. It is unclear if it will pass. The accord was sealed in the autumn of 2018 and relieve Canada of fears. However, it is not over until US lawmakers with different interests have their say.

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