Loonie Fly’s South Through Parity

The US could only wish their had the same job jogonaut that Canada has. The land of Maples has managed to spew out a two month total of +140.5k jobs and this after Friday’s surprise print of +58.2k. That country with the loonie has now posted the strongest back-to-back gains in 31-years. Full time jobs managed to do most of the heavy lifting (+44k), allowing part-time to take a back seat (+14K). The unemployment rate rose by a tick to +7.3% because more people entered the labour force seeking work (+73k) than found it (+58k). Interestingly, the public sector jobs dropped by-19k while the private sector jobs climbed by +86k. All of this has resulted in the dollar loonie to fly south, again breaking through parity. With this Euro uncertainty, the commodity supported currency has rightly been underperforming.

Fridays surprise job print has certainly caught some dollar bulls flatfooted. Now, there should be very little holding the loonie back apart from the technicals. The hourly RSI is very low, with USD/CAD wading in oversold territory. Despite commodities favoring lower prices, any dollar rallies will be seen as good opportunity to own CAD. However, this currency will not fly too far from current levels until there is a market reason to either break dollar support below or Euro event risk requires more dollar acquisition. It back to a loonie contained range trade!

Below are some other highlights of the week:

Americas

• CAD: Canadian building permits rose unexpectedly in March, rising +4.7% to +C$6.83b, driven by planned construction of government and office buildings. The market had been calling for a -1.8% decline. Residential permits fell -1.3% and suggest that the pace of home building may slow in coming months.
• CAD: Canadian housing starts came in well ahead of expectations last month (+14% to +245k). It marks the fastest rate of home building in four-years.
• USD: US wholesale inventories rose less than expected in March (+0.3% to +$480B) held back by the biggest drop in petroleum stocks (-5.9%-retracing the last two months decline) in two-years.
• CAD: Canada’s trade surplus was less than expected in March (+C$351m from a downwardly revised +C$273m in February). The decline in shipment of crude drove overall exports down (-0.4%), only to be outpaced by the biggest decline in imports in 12-months (-0.6%).
• USD: Initial US jobless claims fell-1k, beating expectations of +5k to sit at +367k, w/w. The total number of claims fell by-175k to +6.4m. Analyst’s note this leaves jobs growth somewhere between “escape velocity and stall speed.”
• USD: The US trade deficit widened in March (-$51.83b, up +14.1%), with a “wave of Chinese goods and oil imports (+$238.6b) proving enough to overwhelm record high exports (+$186.7b). It is worth noting that the trade deficit with China continues to expand (+11.9% to +$21.7b).
• USD: JP Morgan announced that is saddled with a $2b trading loss in Q1 and has hinted that more losses could be revealed in Q2. After four years little has changed!
• CAD: Canada posted a second consecutive month of strong employment gains (+58.2). Full-time posted +43.9k, while part-time recorded +14.3k. The average hourly wage increased +2.3%, y/y. The participation rate also edged higher to +66.8% from +66.6% allowing the unemployment rate to tick up to +7.3%.
• USD: US wholesale prices fell slightly (-0.2%) last month as energy costs declined pushing the measure of inflation to its lowest level in two and a half years. Ex-food and energy, it rose +0.2% and y/y, costs were up +2.7%. Worth noting that wholesale gas prices were down -1.7% month-over-month.

EUROPEAN Week in FX

ASIA Week in FX