USD/CAD to move slightly higher if job creation surprises to the downside in Canada – Commerzbank

Canadian labor market data is released today. Commerzbank economists analyze how the employment report could affect the CAD.

CAD should benefit from strong labor market report

It is questionable whether another positive labor market surprise and continued strong wage growth will convince the Bank of Canada (BoC) to raise interest rates again. The labor market would probably have to surprise significantly to the upside and, at the same time, inflation figures to be published in three weeks would have to demonstrate that inflationary pressures have persisted.

A strong jobs report could cast doubt on whether the Bank of Canada will begin cutting interest rates soon, as the market currently expects. Ultimately, continued strong wage growth, combined with strong job creation, should argue for the persistence of strong inflationary pressures, which could necessitate “high rates for longer.” The CAD should benefit from this.

However, if the economists surveyed are correct (for October, the economists surveyed expect a rather moderate job creation of 22,500), or if job creation surprises to the downside, there are many signs that the rate cuts are increasingly on the table. Given the speculation of a new rate hike by the Fed, the USD/CAD would rise slightly.