Canadian jobs: headlines great, details not so much

On the surface, this morning’s Canadian job report was a belter; the unemployment rate fell and job openings grew faster than expected – all signs of a healthy thriving marketplace. But, the composition of these jobs left much to be desired: full-time jobs positions slumped by close to 90,000, with part-time positions soaring by over 110,000 – the largest shift of this magnitude since 2010 – marking something very different to a strong demand for labor.

After the Bank of Canada’s rate hike a few days back, the USD/CAD rate’s recovering slightly off the 18 month lows of 1.2062 but the trajectory of the pair now falls into the hands of the greenback, not the loonie for any further traction.

Fed members talk down prospects of rate hike

A speech by New York Fed President and known rates hawk Will Dudley yesterday sent the USD lower through the Asian session and that remains the case this morning. He told reporters that the Federal Reserve should continue to raise rates gradually given his view that low inflation should rebound, but did not repeat an assertion made three weeks ago that he expects rates to rise once more this year. He will still vote for higher rates in all likelihood but this seems to be an acknowledgment that the median vote on the Committee has shifted more into dovish territory as inflation continues to underperform the central bank’s expectations and targets.

UK data doesn’t deliver

Construction output (a particular bastion of strength in the post-crisis UK economy) took another knock in July, shrinking at a rate of close to 1% in just 31 days. Countering this, manufacturing output rebounded but looks to be primarily due to one-off factors: a 7.6% monthly rise in transport equipment seems unsustainable and we don’t expect this to carry through meaningfully into Q4.

The mixed data’s done little to deter GBP/USD, which has reclaimed 1.32 with what seems like relative ease, but a meaningful push through 1.3250 will be eyed to truly mark one year highs.

The day ahead

The US will be in focus for markets as Hurricane Irma bears down on the Floridian Peninsula over the weekend following the devastation in the Caribbean. The fallout over Trump’s perceived cold shoulder toward his economic adviser Gary Cohn is also catching attention and will inevitably develop ahead of the market’s return on Monday.