Loonie Jumps on Jobs Shock as Dollar Stays Mixed; Stocks Grind Higher Ahead of Fed
The Canadian dollar surged after a blockbuster jobs print sent USD/CAD through key moving averages, while the broader dollar finished mixed and Wall Street inched higher. Traders now pivot to next week’s Federal Reserve decision with inflation expectations easing and Treasury yields firming.
Market snapshot
- USD/CAD dropped ~0.93%, slicing below its 100- and 200-day moving averages near 1.39.
- USD broadly mixed; weaker versus AUD (-0.44%) as the Aussie led weekly G10 gains.
- US stocks edged up (Dow +0.22%, S&P +0.19%, Nasdaq +0.31%), led by tech; utilities and energy lagged.
- US PCE inflation held at 2.8% YoY; core PCE rose 0.2% MoM. UMich sentiment improved to 53.3 with inflation expectations down.
- Treasury yields firmed by ~3 bps across the curve; 10-year near 4.14%.
- Europe closed broadly lower into the weekend; dollar steadied on calmer risk tone.
- Oilfield activity ticked up: Baker Hughes rig count +6 to 413.
- G7/EU in talks on a fuller ban on Russian maritime services; energy market watching.
FX: CAD leads as jobs surprise resets rate debate
Canada delivered a decisive upside surprise on labor markets, boosting the loonie and knocking USD/CAD through critical trend levels. November employment rose by 53.6k versus a -5k consensus, following a strong October. The unemployment rate fell to 6.5% (vs 7.0% expected), aided by a slight dip in participation to 65.1%. The mix was softer—full-time jobs fell 9.4k as part-time roles jumped 63.0k—but wage growth for permanent employees held at 4.0% YoY.
The scale of the beat challenges assumptions of a cooling Canadian labor market and could nudge rate-cut timing expectations, even with the Bank of Canada signaling patience. Technically, the close below the 100- and 200-day moving averages deepens bearish momentum in USD/CAD as shorts press their advantage into next week.
The US dollar weakened against the Australian dollar, with AUD up about 1.4% on the week—the strongest G10 performer. Elsewhere, USD moves were marginal: roughly flat versus the euro, little changed against sterling, and mixed against the Swiss franc and New Zealand dollar.
US macro pulse: steady spending, cooler inflation expectations
US personal income rose 0.4% in September, outpacing forecasts, while personal consumption matched expectations at 0.3%. Headline PCE increased 0.3%, keeping the annual rate at 2.8%, a one-year high. Core PCE rose 0.2% MoM, with the 2.8% YoY rate slightly under consensus. Services dominated outlays, signaling resilient demand.
Forward-looking sentiment firmed. The University of Michigan’s preliminary December index improved to 53.3, with inflation expectations easing: one-year at 4.1% (from 4.7%) and five-year at 3.2% (from 3.6%). That decline is notable for the Fed, as anchored expectations bolster the case for eventual policy easing. October consumer credit rose $9.18 billion, undershooting estimates, hinting at cautious borrowing.
Equities and rates: tech steadies the tape as yields rise
US equities finished higher into the weekend, paced by semiconductors even as parts of media/entertainment lagged. For the week, the Nasdaq led gains, while the Dow and S&P posted modest advances. Treasuries softened, lifting yields by roughly 3 bps across tenors; the 10-year settled near 4.14%. FX volatility remains subdued in the run-up to the Fed, with positioning lightening after recent dollar swings.
Commodities and crypto
Crude oil edged higher, supported by a firmer risk tone and a rise in US rigs, while gold eased and silver advanced. Bitcoin reversed lower after recent strength. Energy traders are watching G7/EU deliberations on a broader ban of Russian maritime services, which could tighten freight and insurance availability.
Europe and policy watch
Most major European stock indices ended near session lows as investors de-risked ahead of central bank meetings. ECB’s François Villeroy said the euro area is in a “good position, not a comfortable one,” underscoring the delicate balance between sticky services inflation and slowing growth.
Next week’s Fed decision anchors the calendar, with markets focused on the policy statement, dot plot, and Chair Powell’s guidance. A softening in inflation expectations versus resilient consumption presents a nuanced setup: the bar for further tightening remains high, but officials may resist endorsing early rate cuts.
FAQ
Why did the Canadian dollar rally so sharply?
Canada’s November jobs report beat expectations by a wide margin, with a 53.6k gain and the unemployment rate falling to 6.5%. The upside surprise pushed USD/CAD below key moving averages, inviting technical selling and boosting the loonie.
What do the latest US PCE and sentiment data mean for the Fed?
Core PCE rose 0.2% MoM with annual inflation at 2.8%, while inflation expectations in the UMich survey eased. That combination supports a steady Fed next week and keeps the door open to cuts later in 2025 if disinflation persists and growth cools.
How did global equities and bonds trade into the weekend?
US indices nudged higher led by tech; Europe closed broadly lower. US Treasury yields rose roughly 3 bps across the curve as risk appetite stabilized ahead of the Fed.
Which currencies outperformed this week?
The Australian dollar led G10 peers, up about 1.4% on the week. The US dollar was mixed overall, notably weaker versus the CAD and AUD, and little changed against the euro and sterling.
What are traders watching next?
All eyes are on the Fed decision and dot plot, with markets parsing any shift in growth and inflation assessments. Energy traders also monitor G7/EU steps on Russian maritime services, while FX desks watch whether USD/CAD maintains its break below the 100/200-DMAs.
This article was produced by BPayNews.
