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Canadian dollar posts 2-month high as jobs surge ‘seals’ October taper

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The Canadian dollar on Friday rose to its highest level in more than two months against the greenback as data showed Canada regaining all the jobs it lost since the start of the pandemic, supporting further cuts to Bank of Canada bond purchases.

The Canadian economy posted a monster gain of 157,100 jobs in September, almost three times the number expected, and the unemployment rate hit an 18-month low of 6.9%, Statistics Canada data indicated.

“While the headline print likely seals the deal for another taper from the Bank of Canada later this month, there’s still a ways to go to fully heal the labour market,” said Royce Mendes, a senior economist at CIBC Capital Markets.

“There was still slack to be absorbed given that the population has increased since early 2020.”

The Bank of Canada is due to make an interest rate decision and update its economic projections on Oct. 27.

The Canadian dollar was trading 0.5% higher at 1.2491 to the greenback, or 80.06 U.S. cents, after touching its strongest since Aug. 5 at 1.2488. The currency was on track to rise for a third week, with a gain of 1.2%

Gains for the loonie came as the U.S. dollar fell against a basket of major currencies. U.S. data showed that employment increased far less than expected in September amid a decline in government payrolls.

The price of oil, one of Canada‘s major exports, was buoyed by a global energy crunch that has helped gas prices to record highs and prompted China to demand increased coal production. U.S. crude prices were up 1.6% at $79.58 a barrel.

Canadian government bond yields were higher across the curve. The 10-year touched its highest since May 13 at 1.601% before dipping to 1.584%, up 1.6 basis points on the day.

 

(Reporting by Fergal Smith; Editing by Ken Ferris)

Economy

Province Invests in Midland Automotive Parts Manufacturer to Boost Local Economy | Ontario Newsroom – Government of Ontario News

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Province Invests in Midland Automotive Parts Manufacturer to Boost Local Economy | Ontario Newsroom  Government of Ontario News



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UK's economy gathers speed, inflation pressures mount – PMIs – Financial Post

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LONDON — Britain’s economy unexpectedly regained momentum in October and cost pressures rose by the most in more than 25 years, according to a survey on Friday that could encourage the Bank of England to raise interest rates for the first time since the pandemic.

The preliminary “flash” IHS Markit/CIPS flash Composite Purchasing Managers’ Index rose by the largest amount since May to hit 56.8 from September’s 54.9. By contrast, a Reuters poll of economists had pointed to a further slowdown to 54.0.

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“The UK economy picked up speed again in October, but the expansion is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in COVID-19 cases,” said IHS Markit’s chief business economist, Chris Williamson.

The rise in the PMI was driven by Britain’s services firms as consumers and businesses picked up their spending. Travel firms benefited from a relaxation of COVID-19 travel rules.

Service sector activity outpaced manufacturing output by the widest margin since 2009 as factories struggled again with shortages of supplies and staff and recorded barely any growth.

A rise in overall employment was close to August’s record high, despite problems in filling vacancies.

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Higher wages and the worsening supply shortages resulted in the fastest increase in average costs since the combined composite index was launched in January 1998. Separate PMIs for the services and manufacturing sectors showed prices charged by firms rose by the most since these series began in 1996 and 1992 respectively.

With inflation set to hit more than double its 2% target soon, the BoE is expected to raise borrowing costs soon as it tries to make sure that rising inflation expectations do not become embedded in British businesses’ pricing decisions.

The Confederation of British Industry said on Thursday that manufacturers were raising prices by the most since 1980 in the face of some of the biggest increases in costs and labor shortages since the 1970s.

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The PMI for the services sector rose to 58.0, its highest in three months, while the manufacturing PMI’s output component – which IHS Markit says currently gives a better picture of the sector than the headline index – sank to its lowest since February at 50.6.

Despite the improved picture for most companies, many consumers are concerned about the outlook for the economy.

A survey published earlier on Friday showed Britons were their most downbeat since they February, when they were under lockdown, and are increasingly worried about the year to come as prices and COVID cases rise. (Reporting by William Schomberg; Editing by Hugh Lawson)

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Dollar set for another week of losses even as Fed tapering looms

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The dollar was heading for a second week of declines on Friday as sentiment stayed tilted towards riskier assets, while an intervention by the Australian central bank put a halt to the Aussie dollar’s recent surge.

The dollar index was last at 93.733, little changed in Asian hours but off 0.24% on the week, as it continues its fall from a 12-month high of 94.565 hit in earlier this month.

It had managed to stem losses on Thursday, bouncing on better U.S. jobs and housing data, but the rally petered out on Friday morning in Asia, where risk sentiment was boosted news that beleaguered developer China Evergrande Group has supplied funds to pay interest on a U.S. dollar bond, averting a default.

But traders are still trying to assess whether the dollar has scope to fall further, or if this is a temporary blip on a march higher.

“People are wondering whether we are at an inflection point, as the dollar has been weakening and that doesn’t really fit with the broader narrative that global growth is cooling and the Fed is on the path to tapering, which should be supportive for the dollar,” said Paul Mackel, global head of FX research at HSBC.

On Friday, benchmark 10-year U.S. Treasury yields were at 1.6872%, slightly off from Thursday’s multi-month high of 1.7%, as markets continue to prepare themselves for an announcement by the Federal Reserve that it will start to wind down its massive bond buying programme, which is widely expected for November.

Mackel said part of the reason for the dollar’s weakness had been strong performances by currencies from most commodity exporting countries.

These were quieter on Friday, however, as traders took profits, analysts said, and energy prices softened.

Brent crude, which had risen above $86 dollars a barrel on Thursday, continued its tumble and was last at $84.10.

The Australian dollar was at $0.7475, off Thursday’s three-month top, as the boost to the China-exposed currency from Evergrande’s news was outweighed by action from the Reserve Bank of Australia to stem a bond sell off, as well as the pause in energy price rises.

The RBA said on Friday it had stepped in to defend its yield target for the first time in eight months, spending A$1 billion ($750 million) to dampen an aggressive bonds sell-off as traders have bet on inflation pulling forward rate hikes.

Also affected by energy prices, the Canadian dollar slipped to C$1.2352 per U.S. dollar, off Thursday’s C$1.2287, a level last seen in June.

The British pound paused for breath at $1.3798, off a month peak hit earlier in the week, to which it had been carried by growing expectations of an interest rate hike to combat rising inflationary pressures.

The euro was little changed at $1.1627, while the yen wobbled within sight of its multi-year lows, with one dollar worth 114.01 yen, compared with 114.69 earlier in the week, a four-year low.

China’s yuan eased against the dollar on Friday after the FX regulator warned of possible action if the currency market is hit by greater volatility following its recent rally. But the yuan still looked set for the biggest weekly gain since May.

Bitcoin was at $63,928, a little off Wednesday’s all-time high of $67,016

 

(Reporting by Alun John; Editing by Sam Holmes and Kim Coghill)

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