USD/CAD holds losses near 1.3930 with US Inflation, Canada’s Jobs on tap

The Dollar remains pinned near 1.3930 lows against the Loonie.
Canada's employment figures are expected to show that the jobless rate increased in November.
In the US, PCE Price Index figures are likely to confirm that inflation remains well above the Fed's target.

Guillermo Alcala FXStreet

The US Dollar remains pinned near monthly lows at 1.3930 on Friday, on track to a 0.2% weekly decline, following another 0.9% drop in the previous week, with all eyes on Canada’s employment figures and the US Personal Consumption Expenditures (PCE) Prices Index releases, due later today.

Recent US employment data has strengthened the case for a Fed rate cut next week. The ADP Employment report showed an unexpected decline in net jobs in November, and the Challenger Job cuts revealed a sharp decrease in layoffs last month, but it also said that US businesses have frozen their hiring plans amid the uncertain economic context.

On the positive side, US Initial Jobless Claims declined to a three-year low of 191,000 in the last week of November, although the data was taken with caution, on the assumption that the Thanksgiving holiday might have distorted the real figures.

Canada's Unemployment Rate is expected to have increased

The Canadian calendar has been light this week, and investors are focusing on November’s employment figures. Net employment is expected to have declined by 5,000 in November, following a 66,600 increase in October, and the unemployment rate is seen ticking up to 7%, from 6.9% in the previous month.

These figures, however, are unlikely to change the view that the Bank of Canada (BoC) will keep interest rates unchanged next week, after two consecutive rate cuts in September and October.

In the US, the Personal Consumption Expenditures (PCE) Price Index is expected to confirm that inflation remains sticky at levels above the Fed’s target rate. PCE inflation index is seen accelerating to a 2.9% yearly rate in November, from 2.8% in October, while the Core CPI is seen growing steadily, at a 2.9% Y-o-Y rate. Likewise, these figures are unlikely to alter the view that the Fed will cut interest rates by a quarter point next week.

Economic Indicator

Unemployment Rate

The Unemployment Rate, released by Statistics Canada, is the number of unemployed workers divided by the total civilian labor force as a percentage. It is a leading indicator for the Canadian Economy. If the rate is up, it indicates a lack of expansion within the Canadian labor market and a weakening of the Canadian economy. Generally, a decrease of the figure is seen as bullish for the Canadian Dollar (CAD), while an increase is seen as bearish.

Economic Indicator

Core Personal Consumption Expenditures - Price Index (YoY)

The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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