Canadian dollar falls as job market stalls, wildfire weakens outlook

Fri May 6, 2016 5:36pm EDT
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By Fergal Smith

TORONTO (Reuters) - The Canadian dollar weakened to a two-week low against its U.S. counterpart on Friday as Canada's labor market stalled, while a raging wildfire in Alberta weighed on the country's economic outlook.

Canada lost 2,100 jobs in April as the oil-rich province of Alberta shed still more jobs in its natural resources sector. Economists had forecast that the labor force would be unchanged after a strong gain in March.

"The details were on the weak side," said Doug Porter, chief economist at BMO Capital Markets, including a another big decline in manufacturing employment.

Economists say production cuts in Alberta's oil sands due to a raging wildfire may bring Canadian economic growth to a standstill in the second quarter, leaving the central bank on the sidelines and weighing on the Canadian dollar.

Both RBC and Bank of America-Merrill Lynch slashed their second-quarter growth forecasts on Friday to 0.5 percent and 0.6 percent, respectively. That will mark a substantial slowdown from the near 3 percent that is expected for the first quarter.

Although less production should boost oil prices, which will lift the Canadian dollar, that will likely be offset by the weaker economic fundamentals, said Scott Smith, senior market analyst at Cambridge Global Payments.

The Canadian dollar CAD=D4 ended the North American trading session at C$1.2919 to the greenback, or 77.41 U.S. cents, weaker than Thursday's close of C$1.2868, or 77.71 U.S. cents.

The currency touched its weakest level since April 18 of C$1.2952.   Continued...

A Canadian dollar coin, commonly known as the "Loonie", is pictured in this illustration picture taken in Toronto January 23, 2015. REUTERS/Mark Blinch