Canada Dollar Rises as Forecast-Busting Jobs Data Backs PolozAri Altstedter and Cecile Gutscher
The Canadian dollar gained against all of its major peers after the country added six times as many jobs in May as forecast, bolstering Bank of Canada Governor Stephen Poloz’s view that the economy will rebound from oil’s collapse.
The currency climbed as employment rose by 58,900 in May, Statistics Canada said Friday in Ottawa, compared with a median prediction in a Bloomberg News survey for an increase of 10,000 positions. The gains were bolstered as the U.S. also posted better-than-projected employment numbers, adding to signs of economic growth in Canada’s biggest trade partner.
“It actually does give a little more credence back to Poloz, because his tone has been upbeat for a couple months -- there’s been a lot of skepticism about that,” said Jane Foley, a senior currency strategist at Rabobank International in London. “Suddenly it seems the Canadian economy in the second quarter maybe is bouncing back.”
The loonie, as Canada’s currency is known for the image of the aquatic bird on the C$1 coin, rose 0.5 percent to C$1.2444 as of 5 p.m. in Toronto. One loonie buys 80.36 U.S. cents.
The gain gave the currency its first weekly advance in three weeks, and cut its 2015 decline to 6.6 percent.
The loonie jumped after the May jobs gain exceeded all 21 forecasts in a Bloomberg survey. The unemployment rate was unchanged for a fourth month at 6.8 percent as more people entered the workforce.
The jobs gains compare with a loss of 19,700 positions from payrolls in April. Canada’s economy unexpectedly shrank at a 0.6 percent annualized pace in the first quarter, a government report showed last week. It was the first quarterly contraction in four years and the largest since the 2009 recession as a plunge in the price of oil sapped business investment, and was worse than Poloz’s forecast for flat growth.
Poloz has said the economic fallout from collapsing oil prices, Canada’s largest export, will be concentrated in the first three months of the year and stronger growth will follow.
“If you’re the Bank of Canada, you’re thinking we dodged a little bullet here,” Mark Chandler, head of Canadian fixed-income strategy at Royal Bank of Canada, said by phone. “It gives credence to their script.”
The U.S. dollar strengthened against most peers on an employment gain of 280,000 jobs last month, compared with a forecast for an increase of 226,000 in a Bloomberg survey. Average hourly wages also climbed more than forecast, a component that has been lagging behind jobs growth.
The data keep the Federal Reserve on track for the first interest-rate increase among developed economies, after holding borrowing costs near zero since 2008 to nurse the economy back to health.
The Bank of Canada kept its key interest rate unchanged at 0.75 percent last week for a third meeting and said the economy is recovering from a 44 percent drop in oil prices in the past year.
“A strong number just means the Bank of Canada is on hold,” instead of considering a rate decrease, said Charles St-Arnaud, senior economist at Nomura Holdings Inc., said by phone from London. “In the U.S., the strong number increases the likelihood of a September hike.”
The median forecast among strategists surveyed by Bloomberg is for the loonie to weaken to C$1.27 next quarter.