USD/CAD continues to remain on a bullish trend, as it keeps making higher highs, reaching a level of 1.3695 toward the end of the week. This upward mo
USD/CAD continues to remain on a bullish trend, as it keeps making higher highs, reaching a level of 1.3695 toward the end of the week. This upward momentum in the pair is somewhat surprising given the usual relationship between Crude oil prices and the Canadian dollar (CAD). Typically, when crude Oil prices rise, it benefits the Canadian dollar because Canada is a major exporter of Oil. However, in this case, the CAD has been weakening against the USD despite bullish Oil prices.
The bullish trend in crude Oil prices can be attributed to a combination of factors, including deliberate production cuts by Saudi Arabia, cooperation within the OPEC+ alliance, geopolitical tensions, inflation concerns etc. These factors have outweighed the concerns about a potential global recession and have kept Oil prices on an upward trajectory for more than two months.
Another factor contributing to the bullish trend in USD/CAD has been the weakening Canadian economy. Economic indicators such as the Canadian Gross Domestic Product (GDP) showed a decline of -0.2% on a month-over-month basis. This economic contraction can erode investor confidence in the Canadian dollar, leading them to favor the stronger US dollar (USD) instead.
However, this week we saw some positive economic numbers from Canada, as well as the US, suggesting that this might be the beginning of an economic recovery in North America.
Canadian Manufacturing Survey
- August Ivey PMI 53.5 points vs 48.6 prior points
- July Ivey PMI was 48.6 points
- Non-seasonally 48.2 points adjusted vs 45.2 points prior
Canadian August Jobs Report
- August employment change +39.9K vs +15.0K expected
- July employment change was -6.4K
- Full time +32.2K vs +1.7K prior
- Part-time +7.8K vs -8.1K prior
- Participation rate 65.5% vs 65.6% prior
- Average hourly wages for permanent employees YoY +5.2% vs +4.7% expected (+5.0% prior)
- Total average hourly wages YoY 4.9% vs 5.0% prior
- Unemployment rate 5.5% vs 5.5% prior
- Participation rate 61.9% vs 62.0% prior
- Involuntary part time rate 18.9% vs 17.2% a year earlier
Employment grew 40K in the month but was outpaced by 103K in population growth. That’s an important dynamic as Canada goes full-tilt on immigration. It’s now seven straight months that population growth has outpaced job growth. USD/CAD fell sharply on this, to 1.3610 from around 1.3660. Macklem was hawkish on Thursday and specifically highlighted wage growth as something the BOC is watching carefully. However, the 50 SMA (yellow) held as support for this pair and it is likely that next week the bullish trend will resume again, pushing the price above 1.37.
USD/CAD
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