08.08.201914:24 Forex Analysis & Reviews: Labour market data set to boost Canadian dollar

USD/CAD pushed to 8-week highs near 1.3350 on Wednesday before a retreat to just below 1.3300.

The Canadian labour-market data is due on Friday with consensus expectations for an employment gain of around 12,000 for July following a 2,000 drop in the previous month, while the unemployment rate is expected to remain at 5.5%.

Housing starts data is also expected to show a sharp decline in June, while building permits have a consensus forecast for a marginal recovery after a 13.0% sharp decline in the previous month. Weak data is priced in with the potential for out-performance.

There is also scope for upside surprises in the labour-market with overall sentiment holding firm.

Global risk conditions will inevitably remain important given a sustained increase in volatility across asset classes.

Fears over the global trade and growth outlook will be a negative factor for the Canadian dollar, while an easing of risks would be a positive one.

Canadian dollar moves will tend to be amplified by shifts in energy prices given that the Canadian currency remains positively correlated with oil.

The pair will remain volatile especially given underlying US-China tensions and the threat that President Trump will reinforce his anti-China rhetoric. However, there are might be some efforts to ease tensions into the weekend with China looking to hold the yuan steady. Any anti-dollar rhetoric would also support the Canadian dollar.

Overall, there is scope for a tentative improvement in risk appetite with buying of risk assets on dips.