Forex Investment and Currency Trading

December 5  - Canada

• Employment change (Nov)
• Unemployment rate (Nov)

 Despite the rather difficult economic environment, the Canadian labour market has been surprisingly resilient, creating a whopping 132K jobs in the past three months. This resiliency should come to an end, and it is expected that the Canadian economy to shed 25K jobs in November as employers reduce their payrolls to contend with slackening demand. Much of the job losses are likely to come from the ailing manufacturing sector, though also expect to see some declines in service sector employment. The unemployment rate should climb to 6.4%, which will be the highest rate of unemployment in Canada in over a year. In the coming months, we are likely to see further deterioration in labour market conditions as the Canadian economy softens in the face of a major U.S. and global economic recession. 

Foreign Exchange: Tomorrow’s Canadian employment report could surprise to the downside, as the 30K or so election-related public administration jobs that were created in October reverse course in November. And with the year-long credit crunch accelerating through October and November, we’ll likely see job losses start to mount in other sectors as well. Given the slide in oil prices and the political uncertainty in Canada right now, CAD seems to be on the backfoot, at least in the short term. A weak Canadian employment report will reinforce the upward trend in USDCAD, though the big market mover tomorrow will likely be nonfarm payrolls, 90 minutes after the Canadian number is released. 

Fixed Income:
There are downside risks to both the Canadian employment report and the U.S. payrolls report, and as a consequence the risk is that government bonds rally coming out of the twin reports on Friday.  As usual, the U.S. figure will be regarded with much greater interest in the market than Canada. Given that a softening labour market simultaneously translates into softer wage pressures, there is scope for the long end to continue its pattern of remarkably keeping up with the short end.  A risk to this is that whisper numbers in the U.S. may be sufficiently dire that no amount of job losses could disappoint the market.  But official consensus expectations could be disappointed fairly easily.