ING: The CAD - FJElite
Canada releases jobs figures at the same time as the US today. That often leaves USD/CAD reacting more to US figures. Incidentally, a dovish print for the Fed tends to see CAD trail other pro-cyclical commodity currencies due to the correlation between USD and CAD rates. All this means the net impact of Canadian jobs data may need to be assessed in the crosses and with some caution.
Consensus is looking for another good print in Canada today: employment rising for a third consecutive month (+20k) and unemployment holding at 6.5% after June’s decline. We do see some downside risks relative to consensus, but our perception is that markets remain too hawkish (18bp by year-end) on the Bank of Canada regardless of the jobs picture. We’d need to see that heating up quite materially to offset the otherwise muted inflation outlook.
We have not changed our USD/CAD forecasts significantly this month. We are expecting a gradual move to 1.38 by year-end on the back of USD weakness, but still see CAD trailing most other G10 currencies in the process.