Published: Thu, 09 Apr 2009 15:17:49 +0200

Canadian Dollar Taking Little Direction from Weak Employment Report

(CEP News) - Weaker-than-expected Canadian employment numbers are not having much impact on the Canadian dollar on Thursday morning.

Positive market sentiment appears to be driving currency markets, which is benefiting not only the Canadian dollar but most of the commodity and high-yield currencies. Among the G10 currencies, the Canadian dollar is one of the top performers against the greenback.

USD/CAD has been on a modest downtrend through most of the session. The selloff picked up steam following the Canadian employment report. In March, the Canadian economy shed more than 61,000 jobs and the unemployment rate rose to 8.0%, according to Statistics Canada. Economists were expecting a decline of 50,000 jobs.

Positive Canadian trade balance data is also not having much impact on the cross. Against most expectations, Canada recorded a small surplus of C$0.1 billion. Economists had forecast the deficit to hold steady at -C$1.2 billion following a -C$1.2 billion deficit in January. The previous months' deficit was initially reported as -C$1.0 billion.

However, Matthew Strauss, senior currency strategist from RBC Capital Markets, said the report was relatively in line with the market consensus.

Strauss said the most important data contributing to positive market sentiment this morning is news from Wells Fargo.

Wells Fargo said it expects to earn about $3 billion in the first quarter, more than double what the street was expecting. In a press release, the company said it expects to report a record net income of approximately $0.55 per share.

With USD/CAD trading near the bottom of its range, Strauss said there could be limited gains later in the afternoon. He said traders could be reluctant to put on short U.S. dollar positions ahead of the Easter long weekend.

"I think 1.2225 (CAD) is going to be an important support level today. I think if we can't break below that by the European close then I think there is a risk the cross moves higher."

Boris Schlossberg, director of currency research at GFT, said he is expecting the cross to continue to bounce within its range. He said the fundamental data on both sides of the board remain extremely weak and won't provide much direction.

He said he will be watching oil prices to determine future direction for the Canadian dollar.

"I think if oil trades over $55 a barrel, then we will see USD/CAD trade around 1.20 (CAD) and if oil falls below $40 a barrel then I think we head back up to 1.25 (CAD)."

Euro/USD down 0.29 cents to 1.3252

USD/CAD down 1.16 cents to 1.2247

USD/Yen up 0.55 points to 100.31

GBP/USD up 0.02 cents to 1.4719

AUD/USD up 0.71 cents to 0.7172

Euro/Yen up 0.46 points to 132.92

Euro/GBP down 0.21 pence to 0.9002

GBP/CAD down 1.64 cents to 1.8031

CAD/Yen up 1.22 points to 81.91

Euro/CAD down 1.91 cents to 1.6230

The U.S. Dollar Index is down 0.17 points to 85.20

All data taken at 9:15 a.m. EDT

By Neils Christensen, neilsc@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca