Canadian Dollar: Jobs weakness caps gains against US Dollar - TD Securities

TD Securities strategists note that Canada’s softer August labour report, including weaker employment momentum and slower wage growth, is unlikely to materially change the Bank of Canada’s (BoC) assessment of the labour market. However, the combination of a downside surprise in Canadian jobs and a stronger-than-expected US payrolls report has weighed on the Canadian Dollar (CAD). They expect USD/CAD to remain anchored around 1.39 in the near term and see CAD underperforming its peers as its relative appeal fades.

Softer jobs, slower wages

"Even with the softer headline print, this report is unlikely to shift the Bank of Canada's perception of Canadian labour markets, as it did note that demand for labour remains subdued despite recent improvements in Wednesday's policy statement."

"Today's report leaves the 6m trend at 23k, which is an acceleration from 16k in July and remains well above the 13.5k trend for labour supply over the same period, while 3m rates of employment/labour supply edged lower from July."

"However, this does ebb some of the recent momentum, and the deceleration in wage growth should help to address some of the Bank's concerns around upside risks to inflation."

"The genuine upside surprise in US payrolls and downside surprise in Canada was enough to overwhelm the temporary support from the BoC's hawkish tilt."

"We continue to see USD/CAD anchored around 1.39 near term."

"With greater uncertainty around the policy paths of other central banks than the BoC, CAD's relative appeal can start to fade with carry trades remaining the flavor of the season."

"We expect CAD to underperform its peers going forward."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)