By Fergal Smith
TORONTO (Reuters) -The Canadian dollar steadied against its U.S. counterpart on Friday, holding on to a modest weekly gain, after softer-than-expected domestic jobs data that had only limited impact on expectations for Bank of Canada interest rate cuts.
The loonie was trading nearly unchanged at 1.3745 per U.S. dollar, or 72.75 U.S. cents, after moving in a range of 1.3726 to 1.3762. For the week, the currency was up 0.3%.
The Canadian economy shed 40,800 jobs in July, giving back some of the substantial gains seen in the prior month and sending the share of people employed in the population to an eight-month low. Economists expected a gain of 13,500 jobs.
“We are still weeks away from the next (BoC) meeting with more key data in between, which should limit the market reaction,” strategists at TD Securities, including Jayati Bharadwaj, said in a note.
“The trade deal with the U.S. remains the big risk on the horizon, but we do not think that it will be a ground-breaking factor for the economy or for the BoC when the majority of exports are USMCA-compliant, and more and more exporters continue to register as such every month.”
About 92% of Canadian exports by value entered the U.S. market on a tariff-free basis in June under the U.S.-Mexico-Canada Agreement.
Investors see a 38% chance that the Canadian central bank will lower its benchmark rate from the current level of 2.75% in its September 17 policy announcement, up from 33% before the jobs data.
Stocks on Wall Street moved higher and the U.S. dollar fell against a basket of major currencies as President Donald Trump’s pick to serve out the final few months of a newly vacant Federal Reserve governor’s seat bolstered expectations for rate cuts by the U.S. central bank.
Canadian bond yields eased across the curve. The 10-year was down 2.5 basis points at 3.377%, while it fell 6.6 basis points further below the U.S. equivalent to a gap of about 91 basis points.
(Reporting by Fergal Smith; Editing by Paul Simao)