USDCAD: Trading Canada?s Employment Report

Trading the News: Canada Net Change in Employment

What's Expected:

Time of release: 06/08/2012 12:30 GMT, 8:30 EDT

Primary Pair Impact: USDCAD

Expected: 5.0K

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Previous: 58.2K

DailyFX Forecast: -5.0K to 15.0K

Why Is This Event Important:

Canada is expected to add another 5.0K jobs in May and the ongoing improvement in the labor market may increase the appeal of the Canadian dollar as it raises the scope for a rate hike. Although the Bank of Canada kept the benchmark at 1.00% in June, the central bank continued to reiterate that removing monetary stimulus 'may become appropriate,' and Governor Mark Carney may sound more hawkish in the second-half of the year as the recovery gradually gathers pace. However, as the BoC looks to address the record-rise in household indebtedness, we may see the central bank refrain from a series of rate hikes, and Mr. Carney may continue to sound cautiously optimistic amid the ongoing slack within the real economy.

Recent Economic Developments

The Upside

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Release	Expected	Actual
Ivey Purchasing Manager Index s.a. (MAY)	54.5	60.5
Gross Domestic Product (Annualized) (QoQ) (1Q)	1.9%	1.9%
Retail Sales (MoM) (MAR)	0.3%	0.4%

The Downside

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Release	Expected	Actual
Building Permits (MoM) (APR)	-1.5%	-5.2%
International Merchandise Trade (MAR)	0.50B	0.35B
BoC Senior Loan Officer Survey (1Q)	--	-16.9

As the economic recovery gradually gathers pace, the pickup in private sector consumption may encourage businesses to expand their labor force, and a positive development may spark decline in the USDCAD as it raises the scope for a rate hike. However, the slowdown in building activity paired with easing trade conditions may drag on the labor market, and a dismal jobs report may keep the BoC on the sidelines as the central bank aims to encourage a stronger recovery. In turn, the recent pullback in the USDCAD may be short-lived, and we may see the pair work its way back towards the 1.0400 figure as it curbs expectations for higher borrowing costs.

Potential Price Targets For The Release

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