Canadian Dollar: Softer Canada jobs seen weigh against US Dollar – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad describes USD/CAD trading just below 1.4200 and broadly aligned with US-Canada two-year yield spreads ahead of June labor data. Haddad expects a sharp slowdown in job gains to 10k and sees scope for markets to pare Bank of Canada hike pricing, arguing this adjustment would leave USD/CAD biased higher in coming sessions.

Labor data risk skewed to upside

"USD/CAD is directionless just under 1.4200."

"Canada’s June labor force survey is the domestic highlight (1:30pm London, 8:30am New York). The economy is expected to add +10.0k jobs in June vs. +87.8k in May and the unemployment rate is forecast to remain at 6.6% for a second straight month."

"USD/CAD is trading in line with US-Canada 2-year bond yield differentials. But there is room for Bank of Canada rate hikes bets (50bps in the next twelve months) to adjust lower, leaving USD/CAD biased higher."

"Leading indicators point to a soft labor market. Job vacancies have fallen to their lowest level since October 2017, the share of businesses reporting labor shortages declined further below its historical average, and hiring intentions over the next twelve months worsened in Q2."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)