Loonie Falls As USD Rally Continues

 | May 10, 2016 06:30

The Canadian dollar lost ground against the USD at the beginning of the week as the market continue to price in the effect of the Canadian and American jobs reports published on Friday. Canada lost 2,100 jobs while the U.S. non farm payrolls (NFP) came in under expectations at 160,000 new jobs. Unemployment rates remained steady in both nations; 7.1 percent in Canada and 5.0 percent in the U.S.

Wild fires continue to rage near Fort McMurray, the oil sands capital of Canada, providing some support to oil prices. The Canadian economy fundamentals have come in weaker with higher trade deficit and low employment which added to this ongoing natural disaster has the USD advancing on the CAD. The Saudi Arabia shake up of its cabinet hints at further instability of oil markets as there are now less probabilities of a deal to be signed amongst Organization of the Petroleum Exporting Countries (OPEC) and other producers.

Analysts updated their rate hike forecasts after the NFP miss with Barclays (LON:BARC) and Goldman Sachs (NYSE:GS) abandoning the possibility of a rate hike after the June Federal Open Market Committee (FOMC). September becomes the next likely candidate but its impaired by its proximity of the U.S. presidential elections. That leaves the December FOMC as the next best option although the one that would put more egg on the face of the Fed as it would be a year since the last rate hike. Economic conditions have changed but the Fed will catch some of the blame as their Fedspeak did not offer any guidance as monetary policy become reactionary instead of proactive in 2016. June still remains in the running thanks to the rhetoric from Fed speakers who haven’t ruled out a rate hike at the next FOMC.