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Market Wire
Strong US, Canadian Data Leave FX Rates Little Changed

Matt Eidinger January 10, 2019

The Department of Labor (DOL) reported Thursday that seasonally adjusted initial jobless claims fell to 216,000 during the week ending January 5th. This is modestly better than market expectations, which were set at 225,000.

The advance reading on continuing jobless claims came at 1,722,000 for the week ending December 29th, falling 28,000 from the prior week’s revised level of 1,750,000.

States reporting the highest increases in initial claims were Michigan (+7,997), where layoffs in manufacturing made up the bulk of new claims; New Jersey (+7,845), where transport, manufacturing, construction and food services drove increases; and Pennsylvania (+7,367), which saw layoffs in transportation, warehousing and construction industries drive the increase.

Although weekly jobless claims are generally viewed as a leading economic indicator, it should be noted that this week’s data from the DOL does not reflect the full effects of the recent government shutdown in the United States. Consequently, the figures could become more volatile, if the shutdown continues much longer.

North of the border, Statistics Canada reported the value of new building permits issued during the month of November 2018 increased by 2.6% from October to C$8.3 billion dollars. Gains were driven in large part by a 16.8% increase in commercial building permits to C$2.1 billion – the highest in more than a decade and a 21.9% rise in industrial building permits as well.

Surprisingly, building permits in Edmonton were relatively flat (-0.3%), while Calgary, the energy capital of Canada, rose a whopping 40% – indicating construction firms may be shrugging off the business uncertainty the current turmoil in energy markets could provoke.

After trading in a half-cent wide range overnight, the USD moved up a feeble 20 bps against the Canadian dollar immediately after the data releases. The Dollar Index (DXY) was a modest 0.17% higher as well, appearing somewhat stable after its month-long decline of 2%.

According the CME Group, overnight index swaps currently indicate a 72.3% chance of that the US Federal Reserve will leave interest rates at their current levels throughout 2019. This is a sharp reversal from the probabilities just a few months ago, which indicated that one or two rate increases were in the cards for 2019.

Bottom Line: Canadian building permits rose during the month of November, despite the sharp decline in oil prices that occurred during that month. Last week’s drop in jobless claims likely reflects that there is still some slack in the labor market and that it would be wise for the Federal Reserve to move forward with a data-dependent thought process.

Matthew Eidinger
Fintech Specialist, Dealing Operations

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