8 June 2007

 

 

 

The Bank of Canada is poised to embark on what could be a series of interest rate increases just as the country's job market continues to show signs of cooling and despite the surge in the dollar.

 

About 14,300 jobs are forecast to have been created during May, up from a drop of 5,200 jobs in April, according to a survey of economists by Bloomberg. The unemployment rate is expected to hold steady at a 32-year low of 6.1 per cent.

 

However, the most recent jobs data are in contrast to "the supersonic strength in the previous six months when gains averaged 48,000 a month," said Douglas Porter, deputy chief economist for BMO Nesbitt Burns Inc. "We suspect that the underlying trend in employment growth is beginning to simmer down from the extraordinary burst of strength around the turn of the year and will settle at something closer to the 15,000-to-20,000 range, representing an annual growth rate of 1 per cent to 1.5 per cent."…

 

But for Canadian dollar watchers it is likely to be all about interest rates during the next few weeks.

 

"It has moved so far, so fast," said Dustin Reid, vice-president and foreign exchange strategist for ABN-Amro Inc. in Chicago, referring to an almost 11-per-cent rise in the loonie against the U.S. dollar within the past three months. "There seems to be a base forming," he said. That could indicate a temporary top in the dollar for a few weeks, he said….