September 6, 2019 / 7:38 PM / 3 months ago

CANADA FX DEBT-C$ snaps losing streak as jobs boom clips rate cut bets

 (Adds details throughout and updates prices)
    * Loonie touches its strongest since July 31 at 1.3159
    * Currency ends seven-week losing streak
    * Canada's economy adds 81,100 jobs in August
    * Canada-U.S. 2-year spread hits narrowest since October
2017

    By Fergal Smith
    TORONTO, Sept 6 (Reuters) - The Canadian dollar strengthened
to a five-week high against its U.S. counterpart on Friday as
domestic data showing a bigger-than-expected jobs gain in August
reduced investor expectations for a Bank of Canada interest rate
cut next month.
    Canada's economy added 81,100 jobs in August, largely driven
by increases in part-time work, Statistics Canada data showed.
That was much more than the 15,000 increase that analysts had
expected.             
    "If the Bank of Canada was on the fence about cutting rates
in October, today's jobs numbers might be one further push
towards standing pat," Avery Shenfeld, chief economist at CIBC
Capital Markets, said in a note.
    Chances of a cut at the Bank of Canada's next interest rate
decision on Oct. 30 fell to 22% from 28% before the data, the
overnight index swaps market indicated.           
    They were nearly 70% before Wednesday's interest decision,
which showed no indication that the central bank was planning to
cut rates despite easing this year by many of its global peers,
including the U.S. Federal Reserve.
    Ivey Purchasing Managers Index data was also upbeat, showing
that the pace of economic activity in Canada picked up in August
as inventories climbed.              
    At 3:05 p.m. (1905 GMT), the Canadian dollar          was
trading 0.4% higher at 1.3172 to the greenback, or 75.92 U.S.
cents.
    The currency touched its strongest level since July 31 at
1.3159. For the week, it was up 1.0%, its first advance since
the first half of July.
    Gains for the loonie came as the U.S. dollar was pressured
by data showing U.S. employers added fewer workers than expected
in August and as Federal Reserve Chair Jerome Powell promised
the central bank will continue to act "as appropriate" to
sustain an economic expansion.                         
    Powell's comments helped boost the price of oil, one of
Canada's major exports. U.S. crude oil futures        settled
0.4% higher at $56.52 a barrel.
    Canadian government bond prices were lower across a flatter
yield curve, with the two-year            down 7 Canadian cents
to yield 1.492% and the 10-year             falling 15 Canadian
cents to yield 1.281%.
    The gap between Canada's two-year yield and its U.S.
equivalent narrowed 4.8 basis points to a spread of -4.0 basis
points, its narrowest gap since October 2017.

 (Reporting By Tom Brown)
  
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