Insights 
VT 
Canada saw a change in Employment Insurance beneficiaries in August, with a month-over-month increase of 0.1%. This is a decrease from the previous month’s rise of 1.2%.
These figures demonstrate a reduction in the growth rate of beneficiaries receiving Employment Insurance. The data suggests a slowing pace in the number of claims compared to the previous month.
Reviewing The Canadian Labor Market
The number of people claiming employment insurance barely increased in August, a significant slowdown from the sharp jump we saw in July. This signals that the Canadian labor market is not deteriorating as quickly as we previously thought. We should now reconsider the assumption of a rapidly weakening economy.
This change in the jobs picture makes it less likely the Bank of Canada will cut interest rates in the immediate future. We had been pricing in a higher chance of a rate cut, but this data gives the central bank a reason to wait. Derivative strategies betting on a rate cut before year-end now carry more risk.
We need to view this alongside the most recent inflation report from Statistics Canada, which showed core CPI holding firm at 2.8% in September. Looking back at historical data, the Bank of Canada has rarely cut rates with inflation this sticky and a job market that isn’t actively collapsing. This suggests any easing of policy will be pushed further into 2026.
Impact On The Canadian Dollar And Equity Markets
As a result, we expect the Canadian dollar to show some strength against the US dollar. Options traders should consider positions that benefit from the USD/CAD exchange rate failing to break above the 1.3750 resistance level it has tested recently. The case for a much weaker loonie has been damaged by this report.
For equity markets, this provides a more stable footing for the S&P/TSX 60 index. The reduced fear of a sharp economic downturn is good for Canadian banks and consumer-focused companies. We could see implied volatility on TSX options decline, making strategies that involve selling puts more attractive in the coming weeks.
