ING’s Francesco Pesole anticipates that Canada’s September jobs report will show a modest payroll rebound, with consensus expecting payrolls to increase by 10,000 following a 42,000 contraction in August, and unemployment rising to 6.5% [1]. Despite these figures, Pesole suggests that the data is unlikely to justify a Bank of Canada rate hike in October, but could reinforce expectations for a move in December, which is already fully priced in by the market [1].
The Canadian dollar has lost approximately 3% against the US dollar over the past month, although it remains in the upper half of the G10 currency scorecard [1]. According to Pesole, US-Canada tensions have receded in importance for FX investors, with the US dollar maintaining dominance in the USD/CAD pair [1].
Pesole notes that a sustained move below 1.420 in USD/CAD would require improved global bond market conditions, as the prospect of a Bank of Canada hike offers only marginal support to the Canadian dollar [1]. Overall, the impact of the September jobs report on the CAD is expected to be limited, with market participants focusing more on broader global factors and the US dollar’s strength [1].
CONCLUSION
Canada’s September jobs data is expected to provide only modest support for the Canadian dollar, with market participants looking ahead to a potential Bank of Canada rate hike in December. The USD remains dominant in the USD/CAD pair, and improved global bond conditions are seen as necessary for a stronger CAD recovery.