News & analysis

Today’s Nonfarm payrolls release saw the US labour marked shed 140,000 jobs in December, which was partly offset by a 135,000 upward revision in November’s data point.

Private payrolls fell by 95,000, below expectations of a 25,000 increase, while manufacturing payrolls increased by 38,000. With the slip in the net employment data offset by November’s revision, the US unemployment rate holds steady at 6.7%. FX markets exhibited marginal USD weakness across the board on the release, with sterling increasing its earlier gains while EURUSD retraced earlier losses to climb into the green. While today’s data point signals a stall in the labour market recovery, a negative print was largely expected due to the timing of November’s data and the incremental tightening of lockdown measures since. Additionally, the data point runs in line with December’s steady increase in initial jobless claims filings. The market impact would’ve been substantially more aggressive should the US have failed to pass the $900bn fiscal stimulus package over the festive period, thus reducing the scope of employment benefits US citizens were eligible for. On top of this, news of an additional $1600 in direct cheques and “quick hit” Covid relief package from the Biden administration has made the slip in the labour market much more palatable.

Simultaneously, Canada’s labour force survey also showed a deterioration in the labour market in December.

Net employment contracted by 62.6k jobs, greater than the -37.5k expectation pencilled in, largely due to the tightening of lockdown measures in Ontario, Alberta, Saskatchewan and Prince Edward Island. However, with today’s reference period for the jobs data resting between December 6th – 12th, the additional tightening in measures will be reflected in January’s data. Quebec’s latest curfew announcement will also weigh on Canada’s labour market recovery, but considering the latest lockdown measures are also being replicated in other major economies, the market impact of the announcements has been muted thus far. The focus remains on the distribution of vaccines, however, as they determine the extent to which current lockdown measures remain in play.

With both US and Canadian labour markets showing the early signs of tighter lockdown measures, the reaction in USDCAD was more nuanced than one would expect.

While slight USD weakness across G10 FX as a whole eventually lifted the Canadian dollar higher, the loonie still took the initial hit due to the first unwind in the labour market since April.


Loonie takes the initial hit of the slip in Canada’s labour market, but broad USD weakness lifts it back into positive territory


Author: Simon Harvey, FX Market Analyst



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