The Canadian dollar moved higher on Friday, reaching its most firm level in three weeks after government employment figures for June showed the economy created more positions than analysts had projected.
Trading at 1.4125 per U.S. dollar, the loonie was 0.3% stronger on the session, equivalent to 70.80 U.S. cents, and had not been this strong since June 19. Over the week the currency posted a 0.5% gain, reversing a run of five successive weekly declines.
Statistics for June showed Canada added 18,200 net jobs, exceeding the consensus forecast of 10,000. The unemployment rate fell to 6.5%, preserving the momentum seen in the prior month even as the report noted ongoing trade uncertainty.
Separately, a Reuters poll cited in market coverage indicated the Bank of Canada is expected to keep its overnight rate unchanged at 2.25% when it meets on July 15, and to maintain that rate well into the next year. The poll attributed the expected pause to inflation pressures that remain largely contained and an economy that is recovering gradually.
Additional data released earlier in the week showed Canadian exports rose for the fourth straight month in May. That string of export gains was presented as further evidence that the economy rebounded in the second quarter after having contracted in two consecutive quarters.
Market context
Stronger payroll numbers combined with improving export volumes provided the immediate support for the currency move. The jobs surprise and a lower jobless rate reinforced a narrative of a cautiously recovering economy, while expectations the central bank will hold its policy rate contributed to a stable interest-rate outlook.
What to watch
- Labour-market releases and any revisions that could alter the perception of momentum in employment.
- Further trade and export reports that may confirm or challenge the reported rebound in the second quarter.
- Central bank communications around the July 15 policy decision and subsequent guidance on the path of overnight rates.