The Canadian employment data was much stronger than expected with an employment increase of 63,000 for October while the unemployment rate fell to 5.8% from 5.9%. Within the employment data, there was a robust 35,500 increase in full-time jobs. In response, the Canadian dollar has tested fresh post-1970 highs against the US currency.

The government and Bank of Canada are certainly very concerned over the impact of Canadian dollar strength on the manufacturing sector. Finance Minister Flaherty has also expressed concern that the currency appreciation is being led by speculation.

While employment data remains so strong, the Bank of Canada will find it very difficult to justify a short-term cut in interest rates to help alleviate currency strength and this will provide further short-term support.