Canadian dollar shoots up almost a cent after weak U.S. jobs report
Weaker-than-expected U.S. job creation in May makes Fed rate increase in June less likely
The Canadian dollar jumped more than a full cent higher against the U.S. greenback Friday after a weaker-than-expected U.S. jobs report.
According to Bloomberg, the loonie hit an intraday high of 77.43 cents US shortly after the release of employment figures that showed U.S. job creation in April hit its lowest mark in more than five years.
The loonie eventually finished the day with a gain of 0.95, putting it at 77.26 cents US.
In mid-May, U.S. Federal Reserve signalled it was ready to hike interest rates in June, but Friday's employment report had market watchers saying that's not so likely to happen.
"A feeble payrolls report greatly reduces the odds of a June Fed rate hike," Sal Guatieri, senior economist at BMO Capital Markets, said in commentary.
"The weakness likely reflects the earlier soft patch in the economy, but it also speaks to a decline in business sentiment. Still, assuming employment rebounds in June and Britain opts to stay in the EU, the Fed is probably on track for a July move," he said.
The loonie wasn't the only currency gaining ground on Friday, as the reduced expectations of a U.S. rate cut pushed down the U.S. dollar against other major currencies. The Japanese yen, the euro and the British pound were both sharply higher against the greenback.
Scotiabank economists Derek Holt and Dov Zigler said in a commentary that "the risk of a June hike by the Fed is now fully wiped out in the wake of [the U.S. employment report] and a Q3 hike is less likely."
They cautioned, however, that the report "also lessens hope that Fed tightening will assist Canada by weakening [the Canadian dollar]," adding that slipping growth here won't be helped by a rise in the loonie.
"Clearly, the weakness in the U.S. is not good news for Canada as 77 per cent of Canadian exports go to the U.S.," said Sherry Cooper, chief economist at Dominion Lending Centres. "The Bank of Canada is counting on the export sector to pick up the slack from the hammered oil sector."
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