The ADP private payrolls report beat expectations with a 235,000 jobs gain, but the main market event the U.S. non-farm payrolls (NFP) came under the forecasted figures at 261,000 jobs and a flat wage growth component. The USD had been gaining ahead of the NFP but quickly deflated as low inflation will not help newly nominated Fed Chair Jerome Powell when he takes over in February. The CME FedWatch tool showing a close to 0 % probability of the U.S. Fed funds rate remaining at the current 100–125 basis points range. A 25 basis points raise is expected as the final market-moving decision made under the leadership of Fed Chair Janet Yellen.
Next week will bring little data for investors to digest in Europe and the United States. Weekly crude inventories and unemployment claims in the US will be the highlights in a thin economic calendar.
The U.S. dollar/Canadian dollar (USD/CAD) currency pair lost 0.28 % in the last five days. The currency pair is trading at 1.2775 after the dual release of Canadian and US jobs data. The USD appreciated in the first half of the week and reached its highest point near 1.29 ahead of the November Federal Open Market Committee (FOMC) meeting concluded with a the US central bank holding rates unchanged while in Ottawa Bank of Canada (BoC) Governor Stephen Poloz delivered a dovish testimony on the economy to the Canadian Senate.
The Canadian economy added 35,300 jobs with the gains coming in full-time employment. Forecasters had predicted a 15,000 gain. Wages also rose to the biggest gain in 18 months boosting the loonie against the dollar for a 0.38 % gain on Friday. The improvement in economic data once again has put forth the argument for another rate hike before the end of the year. The BoC already hiked twice in 2017, but only by enough to return to 2015 levels. The Canadian benchmark rate stands at 1 % .
The price of energy surged in the last five trading sessions. West Texas Intermediate is trading at $55.52 due to the rise of geopolitical risk in oil-producing countries. The Kurdish independence referendum in Northern Iraq will continue to affect supply from the oil-rich region, while current prices continue to cause financial headaches for Venezuela who bet heavily on the price of oil to balance its budget. The Southern American nation will seek to restructure its foreign debt, but there is a high risk that it could default compromising the state-owned oil company.
The cuts to production agreed by Organization of the Petroleum Exporting Countries (OPEC) and other major producers have achieved stability in the oil market and the promise of extending those cuts have taken oil prices to mid-2015 levels. Doubts still remain on how much demand has really recovered. The stability in prices can be easily disrupted as soon as the US shale industry shakes off the effects of the hurricane season and increases the rig count to take advantage of the rising price of crude.