News & Analysis


The Canadian dollar was one of the star performers on Friday’s session after Canadian labour market data blew past estimates as employment rose with 153,700 last month, more than quadruple the 37,500 gain the consensus foresaw. The gains came as Prime Minister Trudeau’s government decided to terminate its pandemic support programme in the same month, which strongly supported employment. The rapid tightening of the labour market in Canada could see the Bank of Canada turn more hawkish in the year to come, especially if wages continue to rise sharply along with inflation. For now, however, markets will be more focused on the Fed’s hiking cycle as they await a new dot plot in December’s Fed meeting.


The US dollar picked up where it left off on Friday and traded in a mixed fashion across the G10 with trading ranges being narrow outside of the EURUSD pair. Friday’s November US jobs report showed a weak headline figure, but the details painted a more positive narrative which meant market pricing of policy tightening by the Fed has remained broadly unchanged. The US jobs market only added 210,000 jobs in November, less than half of the 550,000 consensus. The major slump came from the services sector, as leisure and hospitality did not see the rebound most expected to see while government employment continued to fall. The household survey looked much better, with the unemployment rate falling from 4.6% to 4.2%, but the major discrepancy between the household survey and the employers’ survey had markets scratching their heads following the release. The start of this week will be light in terms of data, however Friday will see the US November CPI release where the consensus foresees a cyclical high of 6.7% YoY.


The EUR is holding lower ground against the dollar this morning amid a rebound in US Treasury yields and a mixed sentiment in markets, while Germany’s factory orders for October printed to the downside. Orders collapsed by 6.9% MoM in October, down from a 1.8% increase in September. The data confirms how the sharp collapse over the summer has left its mark on the industry, which does not bode well for the medium-term outlook. Meanwhile, European Central Bank President Christine Lagarde spoke to the media on Saturday where she repeated that the ECB expects inflation to decline in 2022. With the virus situation remaining grim in the eurozone and risk sentiment being wobbly while the ECB remains a dovish outlier, the euro has few upside support stories until year-end. At 09:30 GMT, eurozone investor confidence from December will be eyed.


Sterling is trading just above Friday’s lows against the dollar after the currency had weakened in the post-Nonfarms session. At the same time, the pound was being weighed down by comments from Bank of England member Michael Saunders who spoke on the outlook for inflation and monetary policy. Saunders, who voted for a rate hike last month, said on Friday he is awaiting more information about the impact of the Omicron variant before deciding on how to vote in the December meeting. Markets were quick to react to his dovish comments, especially as Saunders is widely considered to be the most hawkish MPC member. If the BoE’s biggest hawk is unsure whether he will opt for a rate hike vote, this naturally puts pressure on the expected median vote. Gilts rose after his speech while the pound weakened. Key events for the UK this week include  a speech by Ben Broadbent today at 11:30 GMT entitled “outlook for growth, inflation and monetary policy”, and the release of October’s monthly GDP on Friday.



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