Canadian Dollar underperforms as job market deteriorates, inflation data eyed

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The Canadian Dollar (CAD) underperforms its major currency peers and trades flat against the US Dollar (USD) at around 1.3720 in the early European trade on Monday. The CAD faces selling pressure as the labor market data for February showed that employers fired workers again.

The Canadian Dollar trades significantly lower against its major peers, following the weak Canadian job data.
Investors await the Canadian CPI data for February, releasing at 12:30 GMT.
Higher oil prices will likely limit the downside in the Canadian Dollar.

The data showed on Friday that 83.9K payrolls were out of work, while the economy was expected to have created 10K new jobs. In January, employers laid off 24.8K workers. The Unemployment Rate jumped to 6.7% against 6.6% estimates and the prior reading of 6.5%.

Signs of weakening labor demand are expected to prompt expectations of an interest rate cut by the Bank of Canada (BoC) in the near term.

In Monday’s session, investors will focus on Canada’s Consumer Price Index (CPI) data for February, which will be published at 12:30 GMT.

Going forward, the downside in the Canadian Dollar is expected to remain limited amid higher oil prices due to the closure of the Strait of Hormuz. A sharp increase in the oil price results in higher foreign inflows in the Canadian economy, given that the nation is the largest exporter of oil to the United States (US).

Meanwhile, US President Donald Trump has expressed confidence that Washington will jointly intervene with some nations to reopen the Strait of Hormuz, a passage through which 20% of global oil is supplied, which has been seized by the Iranian military as part of retaliation against the US, and. Israel.

Economic Indicator

Net Change in Employment

The Net Change in Employment released by Statistics Canada is a measure of the change in the number of people in employment in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending and indicates economic growth. Therefore, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

Why it matters to traders?

Canada’s labor market statistics tend to have a significant impact on the Canadian dollar, with the Employment Change figure carrying most of the weight. There is a significant correlation between the amount of people working and consumption, which impacts inflation and the Bank of Canada’s rate decisions, in turn moving the C$. Actual figures beating consensus tend to be CAD bullish, with currency markets usually reacting steadily and consistently in response to the publication.