Germany’s factory orders showed an improvement in October, with a year-on-year decrease of 0.7%, compared to a 4.3% decline previously. This indicates a recovery in factory orders, though still in negative territory.
In Canada, upcoming data from the Labour Force Survey is anticipated to show a weaker job market for November. The Unemployment Rate is projected to rise to 7%, with the Employment Change expected to remain flat following gains in October.
German Factory Orders
The improvement in German factory orders suggests the industrial downturn in Europe’s largest economy may be finding a floor. This aligns with the recent November IFO Business Climate index, which we saw tick up to 87.8, marking its third consecutive monthly rise. We should consider that negative sentiment may be overdone, creating an opportunity to look at call options on the DAX for the first quarter of 2026.
Turning to North America, we are bracing for today’s Canadian Labour Force Survey, with consensus expectations for a weak report showing unemployment climbing to 7%. This bearish outlook is largely priced into the Canadian dollar, suggesting the currency is vulnerable to any surprises. The greater risk for short positions is therefore a stronger-than-expected jobs number, which could spark a sharp relief rally in the CAD.
This situation is complicated by inflation that has proven difficult to tame, as we saw Canada’s headline CPI for October hold firm at 3.1%. This persistence makes it difficult for the Bank of Canada to signal future rate cuts, even if the labor market weakens as anticipated. This policy tension suggests increased volatility, making option strategies like a long straddle on the USD/CAD exchange rate an appropriate way to trade the uncertainty around the announcement.
Central Bank Caution
We remember from the post-pandemic recovery in the early 2020s that central banks are extremely cautious when faced with both slowing growth and stubborn inflation. A single weak jobs report, even if it meets today’s expectations, may not be enough to force the Bank of Canada’s hand. This implies that uncertainty could persist into the new year, supporting positions that profit from price movement rather than a specific direction.
