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USD/CAD drops after labor market combo

Volatility came after the labor market data, so far benefitting the Canadian dollar more.

The Loonie has managed to book some gains against the USD, despite investors focusing solely on todayโ€™s jobs data from the US. The USD/CAD pair was down 0.5% as of writing, trading near 1.37.

US jobs market data send hawkish message

Earlier today, the US Labor Department’s data showed that nonfarm payrolls rose by 263,000, above predictions of 250,000. Notably, the September print was the lowest since April 2021, albeit not terrible.

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The revision to the change in total nonfarm payroll employment for July increased it by 11,000, from +526,000 to +537,000, and the change for August stayed at +315,000.

The number of jobs added during the month lowered, yet despite this, the unemployment rate decreased to 3.5%, whereas experts had predicted that it would remain at 3.7%. The labor force participation rate decreased slightly from 62.4% in August to 62.3% in September.

An essential component of the data, average hourly wages, increased by 0.3% over the last month, matching both the previous estimate and Wall Street projections. However, similarly to expectations, salaries on an annual basis marginally decreased from 5.2% in August to 5.0%.

The Fed doesn’t have cause to scale down its significant interest rate rises, contrary to what some investors had hoped, given evidence of a still-tight job market. Some worry that an active Fed may go too far in slowing down the economy, sending the US into a recession.

WSJ scribe Nick Timiraos wrote that “the September solid employment report is keeping the Federal Reserve on track to approve another large interest-rate increase at its meeting next month as officials seek to lift borrowing costs high enough to soften the labor market and ease inflation pressures.”

Additionally, Neel Kashkari, president of the Minneapolis Federal Reserve Bank, stated on Thursday that despite this week’s employment data showing signs of a cooling labor market, he and his central bank colleagues still have work to do to reduce inflation and are “quite a ways away” from pausing on raising interest rates.

Canadian data are also optimistic

According to Statistics Canada’s report, the unemployment rate in Canada decreased to 5.2% in September from 5.4% in August. The Net Change in Employment was 21.1K, which was somewhat higher than the market consensus of 20K.

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The report said that average hourly employee pay increased 5.2% (or $1.57 to $31.67) compared to September 2021 (not seasonally adjusted), maintaining year-over-year salary growth of over 5% for a fourth consecutive month.

USD/CAD 30m chart, Source: Authorยดs analysis, tradingview.com

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