The Canadian dollar appreciated on Thursday after the price of oil gained 1.7 percent after a higher than expected drawdown from gasoline inventories in the U.S. yesterday. The correlation between energy prices took the loonie to trade at 1.3025 ahead of the Canadian and American employment reports due tomorrow morning.

The Bank of England (BoE) led by Canadian Mark Carney followed through on comments earlier in the summer and cut interest rates in the United Kingdom. Governor Carney was not done with the 25 basis point rate cut and he delivered a complete restart to its quantitative easing program that is a direct response to the perceived negative impact that will befall Britain after it leaves the European Union. The role of central banks has been in question after major QE moves by the Bank of Japan (BOJ) and the European Central Bank (ECB) have fallen flat, but for now the BoE have pushed all the right buttons for the market. The GBP has depreciated and will look ahead for the central bank to steer the economy.

The Bank of Canada (BoC) does not have a meeting in August and will return in the fall with anticipation from investors to reveal what has been the impact of the fiscal stimulus measures announced by the Canadian government in March. The Canadian benchmark interest rate stands at historic low of 0.50 percent. There is not a lot of room to cut and while Governor Poloz has not ruled out negative rates, there are still some options before he is forced to use unconventional monetary policy tools.

The USD/CAD lost 0.347 percent in the last 24 hours. The pair is trading at 1.3025 ahead of employment data in North America. The market will be understandably focused on American jobs which have had a volatile 2 months with a range between 11,000 and 287,000 month to month. Canadian data has a tighter range but has jumped from gains to losses from one month to the next. After last month loss of 700 jobs a gain of around 10,000 is expected in Canada.

The price of West Texas oil gained 1.703 percent in the last 24 hours. WTI is trading at $41.40 but still far from the highs of the summer at $51.27. Crude has had a rollercoaster ride in the past two years. The free fall drop in commodity prices accelerated in January as concerns about the global slowdown rose triggered by the equity sell off in China. The Saudi and Russian governments managed to stabilize the market by promising to talk about an output freeze, but after it failed to materialize the oil price has been at the mercy of high volatility.

Canadian employment is anticipated to come back to positive territory with job gains in the 10,000 range. The impact will not be felt immediately as the U.S. non farm payrolls (NFP) will steal the spotlight as investors look for signs of a resilient U.S. recovery or signs of weakness to trigger buy or sell USD orders. The American and Canadian job numbers will be released on Friday, August 5 at 8:30 am EDT.

Market events to watch this week:

Friday, August 5
8:30 am CAD Employment Change
8:30 am CAD Trade Balance
8:30 am CAD Unemployment Rate
8:30 am USD Average Hourly Earnings m/m
8:30 am USD Non-Farm Employment Change
8:30 am USD Unemployment Rate

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar