Loonie Falls on Negative Jobs Report

The Canadian dollar has had a sharp reaction to the latest jobs report released on Friday.

The loonie weakened against its U.S. counterpart on Friday morning, falling from an eight-month high the day before after the latest jobs report surprised on the downside.

Statistics Canada reported that the economy shed a net 2,200 jobs in June after two months of gains that had put the Canadian unemployment rate at a 40-year low of 5.3% The unemployment rate has now ticked up to 5.5% after the June job losses.

The Canadian dollar was quick to react. In early trading Friday, the Canadian dollar was 0.4% lower at $1.3102 to the greenback, or 76.32 U.S. cents. The currency, which on Thursday hit an eight-month high at $1.3038, traded in a range of $1.3045 to $1.3130. For the week, the loonie was on track to fall 0.1%.

If there was a bright spot in the latest jobs report, it is that wages jumped by the most in more than a year - a sign of underlying strength in the economy. A majority of analysts have ruled out an interest rate cut by the Bank of Canada next week. Chances that the central bank will cut rates at all this year has now slipped to less than 20% from about 25% before the latest jobs data came out on Friday.