Canada Employment Numbers may Result in Rate Hike

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This week in foreign exchange, the sole U.S. event is Consumer Credit, which is expected to jump to $12.2 billion. On Tuesday, Canada releases Housing Starts and Building Permits, and the U.S. will publish JOLTS Jobs Openings.

Canada’s economy created 31.8 thousand jobs in June, well above the estimate of 22.3 thousand. This follows two straight declines. Wage growth also looked strong, as hourly earnings gained 3.5% in June on an annualized basis. At the same time, the unemployment rate climbed to 6.0%, above the estimate of 5.8%. Last week, Bank of Canada Governor Stephen Poloz said that the July rate decision on Wednesday would be based on economic data, and Friday’s strong job creation data will be added ammunition in favor of raising rates at the upcoming meeting.

U.S. employment data was a mixed on Friday, as job growth remained above the 200-thousand level, but wage growth faltered. Nonfarm payrolls dropped to 213 thousand, but this beat the estimate of 195 thousand. Average Hourly Earnings edged lower to 0.2%, shy of the estimate of 0.3%. There was a surprise as the unemployment rate climbed to 4.0%, above the forecast of 3.8%. The data demonstrates that the U.S. labor market remains strong, and the economy continues to perform well. The markets remain bullish on U.S. growth, despite uncertainty in Europe and elsewhere, as well as the growing threat of an all-out trade war between the U.S. and China.

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USD/CAD showed little response to the FOMC minutes, which were released on Thursday. The minutes were somewhat dovish in tone, as policymakers gave a thumbs-up to the strong U.S. economy, but expressed concern about developments abroad. These include growing trade tensions with U.S. trading partners, as well as political and economic developments in Europe. The minutes also reiterated the Fed’s support for a “gradual” rise in interest rates. The markets are circling the September policy meeting for the next rate hike, with the CME Group setting the odds of a quarter-point hike at 80%.