The Canadian dollar CADUSD strengthened against its U.S. counterpart on Friday, rebounding from a four-week low, as stronger-than-expected domestic jobs data supported expectations for another interest rate hike by the Bank of Canada.
Canada’s economy added 59,900 jobs in June, the most since January and higher than a median forecast for a gain of 20,000, while the jobless rate rose to 5.4% from 5.2% as more people searched for work.
“Today’s jobs report for June dispelled the notion raised last month that the Canadian labor market has begun to sharply cool,” said Jay Zhao-Murray, a market analyst at Monex Canada Inc.
“Markets have begun to more confidently buy into our view that the Bank of Canada is set to hike rates once more next Wednesday.”
Money markets see a 62% chance that the BoC will lift its benchmark interest rate by 25 basis points at next Wednesday’s policy decision, up from about 60% before the data.
The Canadian dollar was trading 0.5% higher at 1.33 to the greenback, or 75.19 U.S. cents, after earlier touching its weakest level since June 8 at 1.3387.
Separate data showed that U.S. job growth slowed more than expected in June, which helped cap U.S. bond yields, while the price of oil, one of Canada’s major exports, added to its weekly gain. It was up 0.9% at $72.44 a barrel,
Canadian government bond yields rose across the curve. The 2-year touched its highest level since July 2001 at 4.917% before pulling back to 4.775%, up 2.1 basis points on the day.
The gap between it and the equivalent U.S. rate narrowed by 9.1 basis points to a spread of about 16 basis points in favor of the U.S. bond.