Canadian Dollar (CAD) Prediction Amid Strong Jobs Data & Hawkish BoC

  • Canadian labor market smashes estimates.
  • Farm exports and soaring oil prices boost trade surplus.
  • BoC governor presents stagflation warning, insisting more hikes are essential.

Friday saw the Canadian Dollar rallying as rising oil prices and steady job data boosted the currency. Meanwhile, Canadian unemployment beat predictions at 5.2% against 5.3% estimates. Also, the employment change figures came at 108.3K against 10K estimates.

USD-CAD dropped 200-odd pips, erasing the greenback’s 4-day gains. Meanwhile, the United States announced steady job numbers on Wednesday (amidst Federal hawkishness) but failed to arrest the pair’s decline.

For now, financial markets see a 62% probability that the Bank of Canada (BoC) will execute a 50bp hike in December, nearly 50% up before unemployment and jobs data.

Farm Exports &Surging Oil Prices Boost Trade Surplus

Canada witnessed increased exports in September, boosting the nation’s trade surplus as oil prices remained elevated. Despite economic challenges globally, Canadian products see steady demand as wheat exports enjoy benefits from the Ukraine-Russia battle.

As analysts expect the Canadian economy to slow in the 4th quarter due to BoC’s estimates, surging exports might help erase the slowdown.

Meanwhile, oil prices continued to soar over the previous week, with WTI breaking beyond $90 per barrel. Nevertheless, can we sustain beyond the $90 mark and extend the upside as massive oil prices boost the Canadian dollar in the coming times?

BoC Governor’s Speech

The BoC walks on a fine line with Governor Macklem’s speech before the Senate. He warned about more rate hikes as inflation remains high and recession risks escalate.

Macklem added that October’s 50 basis point increase came after the economic slowdown while warning about the possibility of witnessing the 1970s stagflation case. He believes the Bank of Canada will use all methods to prevent such occurrences.

And that might mean a ‘large’ than ‘normal’ step. It’s clear that the BOC isn’t complete with rate hikes despite the 50bp, and that remained lucrative for the CAD against the US dollar.

Final Thoughts

The CAD recorded substantial gains against the USD. The weekly charts seem to form a shooting star candlesticks closing. And that would suggest more declines for USD-CAD in the coming week.

Meantime, the daily chart had printed a head-shoulders setup with a 24hr candlestick closing beneath 1.35, increasing downside potential. Technicals and fundamentals suggest extended CAD strength in the coming week.

Analysts expect Governor Macklem to maintain his hawkish stance during the 10 November meeting. Markets await US inflation data on that day, and hotter than anticipated figures might halt CAD’s upsides against the USD.