The Canadian dollar weakened sharply against its US counterpart in reaction to weak Canadian jobs data. Statistics Canada reported that in January a mere 2,300 new jobs were added in Canada, much fewer than the forecast 23,100 as analysts were expecting an increase from December’s 17,500 jobs.
USDCAD surged after the news from where it was at 0.9998 to 1.0022 within a minute.
The official unemployment rate ticked up to 7.6 percent from a previous 7.5 percent, making it the highest level in nine months.
The jobs report shows that there was an increase in part-time employment which rose by 5,900 while full- time jobs fell by 3,600.
The data adds to growing speculation that the continued weakness in the Canadian economy will give more reason for the Bank of Canada to refrain from hiking interest rates in the near future and will most likely keep rates low in the next policy meeting. Local business are clearly still not confident enough to hire more workers based on their concerns of the weak economy and effects on it by the European sovereign debt crisis.
Based on the weak outlook and possible additional stimulus from the Bank of Canada , this will lead to a weaker Canadian dollar.