Canadian Jobs Preview: The Bar Is Low For The Loonie For Lift-Off, But Keep An Eye On America's Report

• Canada's first jobs report after the USMCA is expected to be moderate.
• The BOC will likely remain on track for a hike early in 2019.
• The Canadian Dollar has room to rise, but other factors are in play as well.

Canada publishes its employment report for October on Friday, November 2nd, at 13:30 GMT. This is the first such report since Canada, and the US successfully concluded trade talks and announced the USMCA which supplants NAFTA. The accord lifts a massive cloud above prospects for the economy. 

Back in September, the nation with the second-largest land mass in the world gained 63,300 positions. However, the composition of jobs, with many part-time positions increased, clouded the publication. Nevertheless, Canada enjoyed a drop in the unemployment rate to 5.9 percent with a healthy participation rate of 65.4 percent.

Why CAD could rise on the news

Expectations for October are modest: an increase of only 10,000 jobs with the jobless rate staying at 5.9 percent. The low expectations leave room for an upside. Any small beat could lift the loonie.

In previous episodes of substantial increases in part-time jobs, the following month was followed by a rise in full-time ones. The see-saw between full-time and part-time positions is a well-known phenomenon. 

Moreover, the central bank expressed optimism in recent days. Deputy Governor Carolyn Wilkins said it is an excellent time to raise rates. The hawkish approach means that BOC will not be easily deterred from hiking. 

The BOC has recently removed the word "gradual" referring to rate hikes and leaves room to react to incoming data. A significant increase in jobs opens the door to a move already in December, but an interest rate hike is more likely in early 2019. 

The only considerable unknown is wages. The change in salaries has a growing impact on the Canadian Dollar. After reaching a peak of 3.9 percent earlier this year, earnings growth decelerated to 2.2 percent in September. Also here, there is room for optimism that a correction will follow the downfall.

Non-Farm Payrolls and other factors

While the Canadian Dollar can enjoy an OK Canadian jobs report, the moves in the USD/CAD are more complicated. Canada's southern neighbor publishes its own employment report at the same time. The Non-Farm Payrolls rock markets all over the world. A beat on US jobs or wages could boost the greenback across the board. An 

Another factor to consider is the upcoming Mid-Term Elections. Both employment figures are released just four days ahead of the crucial vote. The US Dollar and broader markets are becoming more sensitive to changes in opinion polls as the election draws near. 

A third significant consideration is the mood in stock markets. The falls in markets have pushed the greenback higher at the expense of almost all the rest. Dark clouds around the publication time could adversely impact the loonie, a 

Another minor factor to consider is the dual publication of trade figures. Canada is expected to report another trade surplus while the US will likely print another deficit.

Conclusion

The Canadian Dollar is well-positioned to take advantage of a small beat in the jobs report given low expectations, the BOC's hawkish bias, and last month's weak wages and disappointing composition. 

The US Non-Farm Payrolls and other factors will undoubtedly impact the reaction in the USD/CAD.