Feel like trading some last minute pips before the weekend is over?
Canada prints labor market data on Friday!
Here are some points you need to know if you are planning to trade in the event:
Focus on the event:
Canadian employment data for May: Employment Change, Unemployment Rate
When will it be released:
June 9, 2023 (Friday) 12:30 PM GMT
Use our forex market hours tool to convert GMT to your local time zone.
Expectations:
- Clear 40,000 jobs have been addedslower than the 41,400 jobs added in April
- Unemployment rate to inches higher to 5.1% after staying at 5.0% for five consecutive months
Related data since the last data event/release:
- the S&P Global Manufacturing PMI Decreased from 50.2 to 49.0 contraction from lower output, new orders and employment
- Canada IVEY PMI It fell from 56.8 to 53.5 in May but the employment component rose from 55.8 to 56.2
Previous issues and the impact of the risk environment on the Canadian dollar
May 5, 2023
Overlaying the Canadian Dollar Against Major Foreign Currencies: 1-Hour Forex Planned by TV
Event Results/Price Action:
The economy added a net 41,400 jobs in April, nearly double estimates for the 21,600 increase and higher than the 34,700 increase in March.
The additions were enough to keep the unemployment rate steady, holding at 5.0% for the fifth consecutive month when analysts saw a slight rise to 5.1%.
The Canadian dollar jumped broadly in the wake of the employment change as it boosted the upbeat speech made by BoC Governor McCullum the day before the report was released.
Risk Environment and Internal Market Behaviors:
Concerns about Uncle Sam’s regional banks and the debt ceiling created a risk-off trading environment early that week.
However, risk appetite improved in the middle of the week, and the upbeat rhetoric from Governor McClim helped turn things around in favor of the Canadian dollar.
The risk-friendly trading environment and the Canadian dollar likely contributed to the sharp gains in the Canadian dollar when the better-than-expected numbers came out.
April 6, 2022:
Overlaying the Canadian Dollar Against Major Foreign Currencies: 1-Hour Forex Planned by TV
Event Results/Price Action:
Canada added a net 34,700 jobs in March, up from the addition of 21,800 in February and the expected rise of 10,200.
Meanwhile, the unemployment rate remained at 5.0% for the fourth consecutive month instead of rising to 5.1% as markets had expected.
Interestingly, the Canadian dollar rose against currencies that lost most of it when the US posted weak JOLTS jobs data on Tuesday. The Canadian Dollar rose against the Japanese Yen, Australian Dollar, New Zealand Dollar and British Pound but mostly maintained its ranges against the Swiss Franc, Euro and US Dollar.
Risk Environment and Internal Market Behaviors:
The US printed non-farm payrolls data on Friday (Canada’s report was released on Thursday) so CAD traders had a free hand on the Canadian jobs number alone during the time of its release.
The short Easter trading week and sharp decline on Tuesday also likely contributed to the Canadian dollar’s gains when net job additions beat estimates.
Price action odds:
Possibilities of feeling risky: The lack of major new catalysts and/or surprises has limited price volatility and direction somewhat this week so far. Traders are focusing on global growth concerns amid a rising interest rate environment, as well as uncomfortable economic signals this week including weaker-than-expected Chinese export figures and weaker-than-expected global PMI updates.
The aforementioned topics could remain in focus without a major news surprise, likely supporting the risk-off sentiment in Friday’s Canadian jobs report.
Canadian dollar scenarios:
Possible base scenario:
The US actually printed jobs data last week, so Canadian dollar traders won’t be distracted by other data releases. This means that the Canadian dollar’s immediate reaction may be directly related to the Canadian labor data.
Given that the Employment Change has surprised to the upside in 7 of the last 8 releases, we could see another bullish surprise this week, although the odds for certainty are slightly lower with the S&P and Ivey PMI employment indices at odds with each other.
Given the trend of soft labor environments we’re seeing across major economies, we’re likely to see another strong job printing out of Canada, which could boost the CAD higher in the short term as it gives the BOC another reason to stay hawkish.
But this higher consolidation may be limited if the Canadian bears cannot pull the Canadian dollar back before the jobs event, as a result of the strong rally higher with the Bank of Canada’s surprise rate hike to 4.75% this week.
If the CAD moves higher in print, or even stays at current prices, there is potential for CAD selling on profit taking ahead of the weekend, preventing a major upside surprise for CAD jobs and/or a new broad risk catalyst hitting the news wires.
Possible alternative scenario:
If risk aversion sentiment extends into Friday, and/or if Canadian labor market numbers surprise to the downside below expectations/previously, the Canadian dollar could see some recovery from the BoC rate hike that spurred the rally this week.
In this scenario where we see both broad-based risk-averse and worse-than-expected May jobs numbers, the Canadian dollar could lose points against currencies with hawkish central banks (for example, the Australian dollar, the New Zealand dollar, and the US dollar), or even Opposite the treasury – a haven of Japanese yen.
