Friday’s economic focus is on Canada with the release of the June jobs report. This report often coincides with non-farm payrolls but is standalone this time.<\/p>\n
The expectation is for an unchanged reading after a +8.8K gain in May. The unemployment rate is projected to increase to 7.1% from 7.0%, marking the highest since 2021 and, excluding the pandemic, the highest since May 2016. This follows a rise from a 4.8% low in July 2022.<\/p>\n
The Canadian dollar made gains on Thursday but lagged behind other commodity currencies, partly because of a 2% drop in oil prices. Trade concerns persist, due to recent higher US tariffs and issues with Brazil.<\/p>\n
The USD\/CAD currency pair has been in a consolidation phase for six weeks. It is anticipated to move lower and potentially test 1.34 by the year’s end.<\/p>\n
For those following how this market is developing, here’s what the above tells us. The Canadian economy continues to show clear signs of softening. That expected increase in the unemployment rate, inching up to 7.1%, suggests a labour market under pressure. We’re not dealing with sharp contractions, but the trend is moving steadily away from the tightness seen in mid-2022. When jobs data starts rising like this\u2014not from a dip, but from a steady march upwards\u2014it points to employers cutting back.<\/p>\n
Thomson’s forecast for an unchanged headline number reflects this unease. Though May posted a modest rise in employment, it’s not enough to counter the broader concerns. The Bank of Canada remains highly sensitive to these labour signals, and we would argue \u2013 based on recent commentary \u2013 that they\u2019re watching wage data even more closely than jobs growth.<\/p>\n
Now, the Canadian dollar gained ground mid-week, but the strength was notably uneven. It was outpaced by other resource-linked currencies, a reaction tied to external forces more than anything domestic. Oil sold off by about 2%, and given how heavily Canada leans on energy exports, this knocked investor confidence. Trade uncertainty hasn\u2019t helped either. While many focus on the United States’ activity in that sphere, the tension around South American partners hasn\u2019t eased.<\/p>\n
Sullivan’s analysis of the USD\/CAD pair does raise a few flags. A six-week holding pattern ahead of a directional move suggests positioning is building. Notably, a possible shift towards the 1.34 level requires both Canadian weakness and US stability. The Federal Reserve’s own tone\u2014as well as inflation and rate expectations\u2014will weigh heavily here.<\/p>\n
For those managing short or medium-term bets, we\u2019ve taken a close look at implied volatility levels. They’re unusually low given the backdrop, which means optionality might be underpriced. That\u2019s rare before simultaneous labour reports across borders. But the absence of a US jobs release this time isolates Canada\u2019s print, giving it more market-moving potential.<\/p>\n
Jackson\u2019s team was right to highlight the importance of trade friction. If tariffs remain in place or worsen, it caps upside for the loonie. That makes net long positions hard to hold unless you’re hedging against other terms-of-trade metrics. We\u2019d also advise watching the two-year bond spread versus Treasuries, which continues to drift further in favour of US yields.<\/p>\n
If the data surprise to the downside\u2014especially on full-time employment\u2014price action should intensify. We\u2019re focusing most on the composition of Friday\u2019s figures. Goods-producing sectors may hold up, but if softness spreads to services, then we\u2019ll see increased pressure on the Canadian central bank to pivot again.<\/p>\n
It\u2019s worth remembering that market reaction tends to be sharpest when expectations are narrow. This print has seen forecasters largely aligned, meaning any divergence tends to generate wider follow-through. Given that, we\u2019re currently scanning for reward-to-risk asymmetry in short-dated derivatives that expire before the next rate meeting.<\/p>\n
There are seasonal patterns here too, but they’re less reliable. Participation drops into mid-summer, which can make intraday moves wilder. That\u2019s particularly relevant with options positioning light. If you’re managing exposure over the next few weeks, skew has offered better value than delta lately\u2014particularly on downside protection.<\/p>\n
Morgan’s forward guidance analysis should be approached with some scepticism. We haven’t yet seen enough labour weakness to fully price in a prolonged pause or cut in rates. But if Friday\u2019s figures show another jobless surge, that pricing might shift in a hurry. Accordingly, we\u2019re watching front-end interest rate futures for sudden adjustments more than outright FX.<\/p>\n
There\u2019s little point in waiting for a clear trend to set in. Reactions are increasingly binary. As spreads widen and oil stays soft, correlations with North American equity flows are also resurfacing. That\u2019s feeding back into risk appetite toward the CAD, and in our view, reducing its refuge status even within commodities.<\/p>\n
The short-term view remains cautious. Directional conviction should stay aligned with domestic tier-1 data, and this Friday may well set the tone for how the summer unfolds.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Canada’s job report shows rising unemployment; Canadian dollar gains remain limited amid oil price drop and trade concerns.<\/p>\n","protected":false},"author":62,"featured_media":16965,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-26223","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/26223","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=26223"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/26223\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16965"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=26223"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=26223"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=26223"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}