The Canadian dollar CADUSD rose against the greenback on Friday, recouping a small part of its weekly decline, as data showing faster wage growth supported expectations for an unusually large interest rate hike next week by the Bank of Canada.
The loonie advanced 0.1% to 1.2955 per U.S. dollar, or 77.19 U.S. cents, after trading in a range of 1.2937 to 1.3034. For the week, it was down 0.6% as investors worried about the risk of a global recession.
The Canadian economy lost 43,200 jobs in June, missing expectations of a 23,500 gain, Statistics Canada data showed.
But the unemployment rate fell to a new record low of 4.9% as fewer Canadians looked for work and growth in average hourly wages rose to 5.2% year-over-year, up from 3.9% in May.
The jump in wages “will only add to concerns at the Bank of Canada that high inflation rates won’t ease significantly enough without additional aggressive interest rate hikes,” Nathan Janzen, assistant chief economist at RBC Economics, said in a note.
Money markets moved to fully price in a three-quarter-percentage-point rate increase by the BoC at a policy decision this coming Wednesday, which would be its biggest hike in 24 years.
Meanwhile, stronger-than-expected U.S. jobs data fuelled expectations of another big rate hike by the Federal Reserve later this month.
The price of oil, one of Canada’s major exports, clawed back some of this week’s decline. U.S. crude prices settled 2% higher at $104.79 a barrel.
Canadian government bond yields were higher across the curve, tracking the move in U.S. Treasuries. The 10-year yield touched its highest since June 30 at 3.317% before dipping slightly to 3.302%, up 8.4 basis points on the day.
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