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US, Canadian Jobs Data and the Week Ahead

While the US jobs report took center stage on Friday, especially since the headline non-farm payrolls data significantly disappointed expectations at 148,000 jobs added in December versus around 190,000 expected, the results of the less conspicuous Canadian employment numbers were no less surprising. Canada’s surprise, however, was in the opposite direction, as the data easily beat expectations for both employment change and the unemployment rate. As a result, the USD/CAD currency pair plunged further below both the 1.2500 and 1.2400 levels.

Aside from the substantial miss in the headline US non-farm payrolls data (148K jobs added in December against prior expectations of around 190K), the unemployment rate came in steady and as low as expected at 4.1%, and wage growth also met expectations at a 0.3% increase in average hourly earnings month-over-month. In the immediate aftermath of the release, the US dollar fell significantly but briefly, before quickly regaining its composure and paring much of its initial losses. However, the greenback generally remained under pressure overall, as it has been since mid-December.

In contrast, the Canadian jobs numbers came out much better than expected, as was also the case in the previous month. Canada’s economy added 78.6K jobs in December, versus a very low prior consensus forecast of only 1.8K. In addition, the unemployment rate fell even lower than the previous month to 5.7% against a prior forecast of 6.0%. As a result, the Canadian dollar surged against its major counterparts, most notably the struggling US dollar, ahead of the Bank of Canada’s rate decision scheduled for mid-January. As noted, the USD/CAD currency pair fell sharply immediately after the simultaneous US/Canada employment releases, dropping to a low of 1.2354 before paring some of its losses.

After Friday’s major data dump, the week ahead – the second trading week of the New Year – will be a very light one in terms of key economic releases. The quiet week begins with UK Manufacturing Production on Wednesday, and then Australian Retail Sales and the US Producer Price Index on Thursday. Friday rounds out the week with the US Consumer Price Index and US Retail Sales. As mentioned previously, the following week starting in mid-January will feature the key Bank of Canada monetary policy decision.

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