Canadian Dollar Shot Up by All-Round Strong Job Report, Yen Weakness Continues

Market overviews

Canadian Dollar surges sharply after employment data blows past expectations. Sterling and Euro are firm slightly firmer but there is no clear upside momentum. On the other hand, selloff in Yen is still persisting. Dollar is mixed for now. In other markets, Gold is extending the pull back and it’s threatening 1960 minor support. WTI crude oil is holding above 106 but looks weak. European indexes are in strong rally today, so are US futures. It looks like markets are going into the weekend with an upbeat mood.

Technically, CAD/JPY looks set to break through 92.16 resistance with today’s rally. 93.00 high will be the next focus and break there will resume larger down trend from 73.80. Such development would be inline with USD/JPY’s break of 116.34 earlier today. Next is on when AUD/JPY would break through 86.24 resistance too.

In Europe, at the time of writing, FTSE is up 1.41%. DAX is up 3.07%. CAC is up 2.14%. Germany 10-year yield is up 0.0304 at 0.305. Earlier in Asia, Nikkei dropped -2.05%. Hong Kong HSI dropped -1.61%. China Shanghai SSE rose 0.41%. Singapore Strait Times rose 0.28%. Japan 10-year JGB yield dropped -0.0078 to 0.184.

Canada employment grew massive 337, unemployment rate close to record low

Canada added a massive 337k jobs in February, well above expectation of 123k. Full time jobs grew 122k while parti time jobs rose 215k. Goods-producing jobs rose 44k and producing jobs rose 293k.

Unemployment rate dropped sharply from 6.5% to 5.5%, better than expectation of 6.2%. The level was now below pre-pandemic rate at 5.7% in February 2020, and similar to record lower of 5.4% back in May 2019.

Total hours worked also rose 3.6%, exceeding pre-pandemic level for the first time. Employment rate rose 1% to 61.8%. Labor force participation rate rose 0.4% to 65.4%.

ECB Villeroy: Interest rate rise would be very gradual

ECB Governing Council member Francois Villeroy de Galhau reiterated to BFM business radio, “we have said that if the rise in interest rates were to start, it would be very gradual. We have decided to lift our foot off the accelerator … but there is not the automaticity we seen in other central banks.”

Villeroy also dismissed the idea that rising commodity prices could drag Eurozone into recession. He said, “growth remain positive, there is no recession.” Meanwhile, he expected inflation to “get back down to around 2%” from from the current 5.1% level.

Another Governing Council member Olli Rehn echoed, “any adjustments to the key ECB interest rates will take place some time after the end of the APP net purchases and will be gradual.”

UK GDP grew 0.8% mom in Jan, all sectors were up

UK GDP grew 0.8% mom in January, well above expectation of 0.2% mom. All sectors grew in the month, with services up 0.8% mom, production up 0.7% mom, and construction up 1.1% mom.

GDP is now 0.8% above pre-coronavirus level in February 2020. Services is 1.3% above the pre-coronavirus level, construction 1.4% above. But production remains -2.0% below the level.

Also released, industrial production rose 0.7% mom, 2.3% yoy in January, versus expectation of 0.3% mom, 1.9% yoy. Manufacturing production rose 0.8% mom, 3.6% yoy, versus expectation of 0.2% mom, 3.1% yoy. Goods trade deficit widened to GBP -26.5B, versus expectation of GBP -12.6B.

RBA Lowe: It’s prudent to plan for an interest rate increase

RBA Governor Philip Lowe said it’s “plausible” for interest to be lifted from the current 0.1% this year. “It would be prudent to plan for an increase,” he added. “For many borrowers that’s going to come as quite an unwelcome development, although I know from the letters that I get every day when I turn up at work that many depositors have a different view,”

Meanwhile, he said “I don’t feel mounting pressure,” on raising rates. “We do what we think is the right thing at each of our meetings, so the pressure, it’s great for media stories, but I don’t feel that myself.”

New Zealand BNZ manufacturing rose to 53.6, next result may see fallout from Russia/Ukraine conflict

New Zealand BNZ Performance of Manufacturing Index rose from 52.3 to 53.6 in February. Looking at some details, Production rose from 51.1 to 52.1. Employment rose from 49.5 to 51.7. New Orders rose from 53.6 to 58.2. Finished stocks dropped from 52.5 to 50.0. Deliveries dropped from 54.0 to 53.5.

BNZ Senior Economist, Craig Ebert stated that “underlying unease will certainly be piqued by the sustained high COVID case numbers as we go into March.  The next PMI result may also see fallout from the Russia/Ukraine conflict, whose global impacts will be felt far and wide.”

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 115.91; (P) 116.05; (R1) 116.29; More…

Intraday bias in USD/JPY remains on the upside for the moment. Current rally is part of the up trend from 102.58. Further rise should be seen to next long term resistance at 118.65. On the downside, below 116.24 minor support will turn intraday bias neutral first. But outlook will remain bullish as long as 114.40 support holds, in case of retreat.

In the bigger picture, no change in the view that rise from 102.58 is the third leg of the up trend from 101.18 (2020 low). Such rally should target a test on 118.65 (2016 high). Sustained break there will pave the way to 120.85 (2015 high) and raise the chance of long term up trend resumption. This will remain the favored case as long as 55 week EMA (now at 111.75) holds.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
21:30 NZD Business NZ PMI Feb 53.6 52.1 52.3
23:30 JPY Overall Household Spending Y/Y Jan 6.90% 3.60% -0.20%
23:50 JPY BSI Large Manufacturing Conditions Index Q1 -7.6 8.2 7.9
07:00 EUR Germany CPI M/M Feb F 0.90% 0.90% 0.90%
07:00 EUR Germany CPI Y/Y Feb F 5.10% 5.10% 5.10%
07:00 GBP GDP M/M Jan 0.80% 0.20% -0.20%
07:00 GBP Index of Services 3M/3M Jan 1.00% 1.20% 1.20%
07:00 GBP Industrial Production M/M Jan 0.70% 0.30% 0.30%
07:00 GBP Industrial Production Y/Y Jan 2.30% 1.90% 0.40%
07:00 GBP Manufacturing Production M/M Jan 0.80% 0.20% 0.20%
07:00 GBP Manufacturing Production Y/Y Jan 3.60% 3.10% 1.30%
07:00 GBP Goods Trade Balance (GBP) Jan -26.5B -12.6B -12.4B
13:30 CAD Net Change in Employment Feb 336.6K 123.0K -200.1K
13:30 CAD Unemployment Rate Feb 5.50% 6.20% 6.50%
15:00 USD Michigan Consumer Sentiment Index Mar P 61.3 62.8
15:00 GBP NIESR GDP Estimate (3M) Feb 1.10% 0.90%