Canada's dollar pulled back against its US counterpart on Friday as crude oil prices fell and markets digested mixed US and Canadian employment data for August. Canada unexpectedly added 12,000 jobs last month, which diverged with economists' prediction of a loss of 4,500 jobs. But the unemployment rate climbed to 7.0 percent after having held steady at 6.8 percent for half a year.
"It was a little surprising to see the Canadian dollar behave as it has over the course of the session, because the employment data was, in my opinion, fairly robust," said Scott Smith, senior market analyst at Cambridge Global Payments in Calgary, noting that weak oil prices and US job numbers took the spotlight. US employment growth rose less than expected in August even as the unemployment rate dropped to a near 7-1/2-year low of 5.1 percent and wages rose.
"You don't have to dig too far beneath the surface to see that it's a little bit more of a nuanced picture on both reports," said Doug Porter, chief economist at BMO Capital Markets. The Canadian dollar finished at C$1.3265 to the greenback, or 75.39 US cents, weaker than the Bank of Canada's official close of C$1.3194, or 75.79 US cents on Thursday. The loonie remained within recent trading ranges, hitting between C$1.3160 and C$1.3290 through Friday's session.
Oil prices fell some 2.0 percent on Friday as risk-adverse sentiment dominated markets and traders remained concerned about excess supply, brushing off figures that showed the number of US rigs drilling for oil fell. Looking ahead to next week, the currency is expected to move in lock-step with oil prices until the Bank of Canada's next policy decision, due on Wednesday.
The Canadian data, alongside trade and economic growth reports earlier this week, is unlikely to persuade the Bank of Canada that another interest rate cut is necessary at this time. "We won't see the Bank of Canada do anything at this meeting ... but I'd be cautious of thinking the Canadian economy has turned a corner at this point," said Smith. Canadian government bond prices were mixed across the maturity curve, with the two-year price down 2 Canadian cents to yield 0.441 percent and the benchmark 10-year falling 22 Canadian cents to yield 1.439 percent. The Canada-US two-year bond spread narrowed to -26.8 basis points, while the 10-year spread narrowed to -69.2 basis points.