USD/CAD snaps daily advances after hitting highs unseen in 3/1-2 years

USD/CAD snapped a multi-year high to trade little changed on brightened US economy outlook. Meanwhile, the Canadian indicators, pressured the earlier advances.

Having hit a session high at 1.0707 at 13:30 GMT, the highest since May 2010, USD/CAD traded little changed. The pair traded at 1.0658 at 14:47 GMT. Support was likely to be received at December 2nd low, 1.0614, while resistance was to be encountered at May 26th 2010 high 1.0745.

The U.S. Bureau of Labor Statistics reported today on the non-farm payrolls in November. The data showed that employers added 203 000 workers in November, compared to a revised 200 000 increase in October and larger than the median forecast of 185 000 advance.

A separate report by the same Bureau showed the jobless rate reached 7% in November, the lowest since 2008. Projections pointed to a value of 7.2%, while last month value stood at 7.3%. The progress in the labor market will probably provide a spark for the US economy.

US average hourly earnings increased to 0.2% in November from the previous month to reach $24.15, which is a 2% yearly increase. The average weekly hours for all workers also increased from 34.4 in October to 34.5 in November.

The labor market should develop at an even faster pace to help the wage growth, the underlying factor for increased consumer spending, which accounts for almost 70% of the US economy.

Yesterday, the US Commerce Department reported the nation’s revised Gross Domestic Product grew at a 3.6% annualized rate in the third quarter, up from the initial estimate of 2.8% and the strongest since Q1 of 2012, beating analysts’ projections for a 3.1% expansion. According to the report, US growth was mainly driven by the largest increase in inventories since early 1998. Inventories increased at a $116.5 billion annualized pace in Q3, compared to $86 billion rate the preceding quarter.

The increase in employment, combined with faster wage gains and more working hours, signals that the US companies are considering that demand will improve in the future and leaves workers more means to spend.

Scott Anderson, chief economist at Bank of the West in San Francisco, said, cited by Bloomberg: “We’re on the verge of seeing an acceleration of the economy that’s going to be more led by the consumer. You’re seeing improved income trends, reduced gasoline prices, and we’re getting further away from the payroll tax hikes that kicked in at the start of the year.”

Meanwhile, Statistics Canada reported today that the nations employment rose by 21 600 in November and the unemployment rate remained at 6.9%. The jobless rate held at the same level, the lowest since 2008 for a third consecutive month as employers hired new part-time workers. Analysts predicted 12 000 new job positions and an unchanged jobless rate.

Canadian companies postpone major investments, as the global demand is still modest and the Bank of Canada kept its main interest rate at 1% on Wednesday, reasoning the decision with a significant slowdown in the economy.

According to the data from the Statistics Canada, almost all of the jobs added in November are a result of the 20 000 part-time positions, while full-time positions increased by only 1400.
This year part-time employment accounted for 46% of all job gains, while during the same period last year, 99% of the jobs created were full-time.

On Wednesday, Bank of Canada confirmed that monetary stimulus is still appropriate, but there are some downside risks to inflation, which seem greater than previously thought. In an accompanying statement the BoC said it considered “that the substantial monetary policy stimulus currently in place remains appropriate.”

Canada reported its first trade surplus in more than a year in October. Last trade surplus was to be seen in April 2011. The Statistics Canada reported that the country’s trade surplus was CAD 0.08 billion in October, compared to a deficit of CAD 0.30 billion in September, whose figure was revised from a previously reported deficit of CAD 0.44 billion.

Canada posted its first trade surplus since April 2012 in October, official data showed on Wednesday. Analysts projected that Canada will post a trade deficit of CAD 0.8 billion in October.

Elsewhere, EUR/USD traded at 1.3671 by 12:53 GMT, gaining 0.01% on a daily basis. Support was likely to be received at December 5th low, 1.3544, while resistance was to be encountered at October 31st high, 1.3738.