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Published

1 year ago

February 2, 2024

Dripp

Markets pile into the US Dollar after NFP posts biggest number in a year.
Canada wrapped up econ data on Wednesday, Loonie traders await Ivey PMIs next Tuesday.
US NFPs also saw huge revisions on the back end.

The Canadian Dollar (CAD) is broadly higher for Friday, gaining ground against nearly every major currency peer across the FX market, but the US Dollar (USD) has taken the top spot for the day after US Nonfarm Payrolls (NFP) surged to their highest figure in a year.

Canada is absent from the economic calendar on Friday, and CAD investors will be looking forward to next Tuesday’s Canadian Ivey Purchasing Managers Index (PMI) figures. Bank of Canada (BoC) Governor Tiff Macklem will also be making an appearance next Tuesday.

Daily digest market movers: US NFPs dominate the market, Canadian Dollar trims weight against the Greenback

US NFPs printed at their highest level in a year, coming in at 353K in January and easily trouncing the forecast of 180K.
December’s NFP also saw a drastic upside revision, from 216K to 333K.
US Average Hourly Earnings in January also climbed, printing at 0.6% versus the forecast of 0.3% and the previous month’s 0.4%.
YoY Average Hourly Earnings climbed to 4.5% for the year ending in January, compared to the forecast of 4.1% and the last print of 4.4% (revised upward from 4.1%).
The US Dollar surged across the entire FX market post-NFP, marking up gains against all of its major currency peers.
The US Dollar is one of the best performers on the week and is in the green or flat across the board.
The Canadian Dollar saw gains against most of its peers, but shed weight against the Greenback.
CAD and USD vie for top spot on the week, but NFP beat is the Greenback’s clincher.

Canadian Dollar price today

The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Japanese Yen.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		0.68%	0.73%	0.51%	0.87%	1.22%	1.17%	0.91%
EUR	-0.68%		0.03%	-0.16%	0.19%	0.55%	0.48%	0.22%
GBP	-0.71%	-0.04%		-0.20%	0.15%	0.50%	0.45%	0.19%
CAD	-0.51%	0.17%	0.22%		0.35%	0.70%	0.66%	0.37%
AUD	-0.88%	-0.19%	-0.14%	-0.35%		0.35%	0.30%	0.04%
JPY	-1.16%	-0.55%	-0.43%	-0.64%	-0.28%		0.03%	-0.23%
NZD	-1.18%	-0.49%	-0.45%	-0.66%	-0.31%	0.05%		-0.27%
CHF	-0.92%	-0.21%	-0.17%	-0.38%	-0.02%	0.33%	0.28%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Technical Analysis: USD/CAD climbs back into familiar territory near 1.3450

The Canadian Dollar (CAD) is up against the majority of its major currency peers, gaining two-thirds of a percent against the Japanese Yen (JPY) and the New Zealand Kiwi (NZD). The Canadian Dollar shed half a percent against the US Dollar, bringing the USD/CAD within reach of the week’s opening bids as the pair goes flat.

USD/CAD surged back above the 200-hour Simple Moving Average (SMA) near 1.3443, and the pair tested into the 1.3480 neighborhood on Friday.

USD/CAD’s Friday surge sends the pair back into a consolidation pattern between the 50-day and 200-day SMAs, and USD/CAD is set to continue churning in near-term congestion as prices stick close to the 200-day SMA near the 1.3500 handle.

USD/CAD hourly chart

USD/CAD daily chart

Nonfarm Payrolls FAQs

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.