Canadian jobs preview: The bar for the C$ to rally is quite low

Canada publishes its labor market report for March on April 5th, at 12:30 GMT. The nation enjoyed a winning streak of surprisingly strong jobs reports. In February, employment rose by 55.9K and in January 66.8K, far above expectations. Some economists began doubting the accuracy of the data, but expanding labor markets are seen worldwide, despite fears of a downturn.

Other parts of the jobs report were promising as well. The unemployment rate is at a low level of 5.8% and wage growth continued accelerating, climbing to 2.25%.

This time, the number of positions is forecast to tick up by a symbolic 1K, or virtually remain flat. Given the substantial gains, a payback month makes sense. But that was the thought in previous months, and it did not happen.

Low expectations mean that any upside surprise can boost the loonie. An increase of 10K could be enough to support it, while a drop of up to 10K will probably be shrugged off by the Canadian Dollar.

In case the figure meets expectations, wages could play a critical role in shaping the reaction. At this point, there is no available forecast for Average Hourly Wages, but any figure above 2% will probably be satisfactory. 

Bias and timing

Apart from the low expectations, the reaction is shaped by the current market bias, which is mostly positive. Better than expected Chinese figures and reports about progress in US-Sino trade talks send markets higher and this is beneficial for the Canadian Dollar. 

In addition, oil prices continue climbing, hitting new 2019 highs on an almost daily basis. On this background, the wind is blowing in the loonie's back.

The greatest wildcard is the US Non-Farm Payrolls. The American jobs report disappointed in February with a meager increase of 20K jobs, and a return to around 200K positions is expected. Wages are projected to remain on the high ground, around 3.4% seen last time. However, the NFP is notorious for its wild swings, similar to the Canadian jobs report. 

So, the reaction on USD/CAD heavily depends on the US side of the equation, due to the timing. Nevertheless, the current trends favor the C$, thus favor a fall in USD/CAD.