The Canadian dollar shone this week and posted gains over the last four days, gaining 1%. On Friday, USD/CAD traded at about 1.3732, unchanged for the day in the North American session.
Canada will end the week with the employment report for July. The report in June was soft, and job growth came in at -1.4K, a rare decline. Markets are expecting a strong turnaround, with the estimate at 26.9K.
The unemployment rate is however expected to edge up to 6.5%, versus June’s 6.4%.
The Bank of Canada will be monitoring the numbers closely as its next meeting is on Sept. 4. The BoC has led the recent trend of cutting rates globally and reduced rates by 0.25% at each of the last two meetings.
If the labor market cools further, it will support the case to cut rates again, possibly as early as Sept. The Fed is virtually certain to reduce rates at its September 18 meeting and this would make it easier for the BoC to reduce rates without causing downward pressure on the Canadian dollar.
The weaker economic data in the US and the meltdown in stock markets globally have increased expectations of a 0.5% cut from the Fed in Sept. According to the CME’s FedWatch tool, the chance of that scenario has soared to 54.5%.
