Canada’s September inflation data were expected to show the headline rate rising by 0.2% month-on-month, while core measures were described as staying anchored around 2.0%. Labour-market momentum has softened, reflected in two consecutive negative jobs prints in August and September, alongside the unemployment rate increasing to 6.5%. The Bank of Canada was still seen as keeping a December “insurance” rate hike in play, supported by resilient growth and a widening rate spread with the Federal Reserve, while the central bank was also due to publish its business outlook survey.
Monetary Policy And Labour Market Developments
Canada’s September inflation data were expected to show the headline rate rising by 0.2% month-on-month, while core measures were described as staying anchored around 2.0%. Labour-market momentum has softened, reflected in two consecutive negative jobs prints in August and September, alongside the unemployment rate increasing to 6.5%. The Bank of Canada was still seen as keeping a December “insurance” rate hike in play, supported by resilient growth and a widening rate spread with the Federal Reserve, while the central bank was also due to publish its business outlook survey.
Canadian Dollar And Market Rate Expectations
Rate expectations were framed as limiting further Canadian dollar gains against the US dollar. Markets were said to be fully pricing a 25 bp hike in December and, in addition, implying 9 bp for the next policy meeting. Against that backdrop, the bias was for limited USD/CAD downside, with projections pointing to a return to 1.420 by both month-end and year-end.
