Canadian Dollar Hits 2-Year High Against Greenback

Canadian dollar rallied 15% against the US since March, hitting a two-year high of 1.2792 against the greenback. Canadian economy added greater than anticipated number of jobs in November, as per data provided by Statistics Canada, though the rate of growth declined and the figures mirror labor environment before additional lockdowns were enforced in the final leg of the month.

Canadian economy added 62,100 jobs in November and the jobless rate declined to 8.5%, surpassing analysts’ forecasts for an addition of 20,000 jobs and for the unemployment rate to stay at 8.9%. Employment stays roughly 3% below pre-pandemic February levels.

Employment remains about 3% below pre-pandemic levels.

Royce Mendes, senior economist at CIBC Capital Markets, said “Canada’s labor market continued to outrun COVID in November. That being said, I think you could see some of the effects of additional restrictions weighing on the services sector.”

Employment in the service sector, which was affected by the pandemic, increased by 17,900, while employment in the goods industry increased by 44,200. Full-time employment rose by 99,400, while part-time employment declined by 37,400. Full-time employment stood 2.9% below pre-pandemic February level.

Nearly 448,000 Canadians stood underemployed in November compared with pre-pandemic February level.

Aggregate hours worked across all sectors, in the meantime, increased by 1.2% compared to October. The employment info is perceived to strengthen forecasts that the Bank of Canada will maintain its benchmark interest rate at 0.25%. Economists polled by Reuters do not anticipate the bank to boost its bond purchase program.

Ryan Brecht, a senior economist at Action Economics, said:

“The jobs (report is) consistent with no change in the BoC’s 0.25% rate setting at next week’s announcement.”

Economists anticipate the USD/CAD to rebound roughly 1% to 1.30 in a month, before reversing to 1.2739 in a span of twelve months, the survey of 30 currency strategists indicated. A month before, analysts forecasted 1.32 in a month and 1.2938 in a year.

Stephen Brown, senior Canada economist at Capital Economics, said “We see several tailwinds for the Canadian dollar. For a start, we think the consensus is far underestimating the outlook for the Canadian recovery, which we think is poised to outperform many other economies given the much greater policy support provided this year.”

Notably, earlier last week, Canadian Finance Minister Chrystia Freeland anticipate the budget deficit reaching a record high level of C$382 billion ($297 billion) on Covid-19 emergency assistance, further stating that C$100 billion in the form of monetary stimulus would be provided after containing the outbreak of virus.