USD/CAD flat around 1.2450, as solid US & Canadian labour reports fail to stir the pot

• USD/CAD is flat at 1.2450 as US and Canadian jobs report fail to trigger lasting volatility. 
• The pair will remain focused on oil price movements next week with a bare Canadian economic calendar. 

The Canadian dollar has broadly failed to benefit from the release of a strong Canadian labour market report on Friday, much like the US dollar and USD/CAD is sitting in neutral territory on the day around the 1.2450 mark. The pair has been subject to significant chop in recent days, in tandem with the volatile conditions seen in crude oil markets. As things stand, and though crude oil prices are well off weekly lows, WTI is set to end the week down around $2.0 or slightly more than 2.0%.

Bearish impulses from profit-taking, technical selling, big US inventory builds, concerns about demand in China (where a new Covid-19 outbreak is kicking off), and concerns that the US might release oil from its strategic reserve has outweighed the (widely expected) OPEC+ decision not to increase output in December by more than the 400K barrels per day/month rate stipulated in the cartel's current agreement. Looking ahead, with the Canadian economic calendar bare next week, choppiness in crude oil markets will remain a key driver of the pair.  

Strong Canadian Labour Market

The Canadian labour market is on a tear. The economy added 31.2K jobs in the month of October, and while this was a little below the market consensus forecast for 50K, its was entirely driven by gains in full-time employment. Moreover, the private sector gained 70K jobs, taking its five-month count to 618K. That’s amounts to the fastest pace that the Canadian economy has added private-sector jobs on record if the initial post-lockdown reopening period of 2020 is discounted. Hours worked was also up 1.0% MoM, taking the YoY change in hours worked to 7.3%. The unemployment rate dropped more than expected to 6.7% from 6.9% in September.

The strong jobs report bodes well for the Canadian economy, suggesting a strong start to Q4. National Bank of Canada (a local bank, NOT the central bank) believe “there is room for more labour market build up in the months ahead” and cite indicators of strong demand for labour, including CFIB data which shows as many as 49% of SMEs are reporting a lack of skilled labour as limiting production, while 40% are reporting a lack of unskilled labour, with both of these metrics at their highest since 2009. Friday’s jobs report does not harm the prospect of BoC rate hikes as soon as Q2 2022.