Canada's Jobs Weakness Culls Gains Against US Dollar
TD Securities strategists suggest that Canada's recent labour report has weighed on the Canadian Dollar (CAD) due to softer employment momentum and slower wage growth in August. While this may not significantly impact the Bank of Canada's assessment of the labour market, it has combined with a stronger-than-expected US payrolls report to put downward pressure on the CAD.
The 6-month trend for job creation remains at 23k, an acceleration from July, but still above the supply growth rate of 13.5k over the same period. This slight deceleration in momentum and slower wage growth may ease some concerns about inflation upside risks held by the Bank.
The strategists expect USD/CAD to remain anchored around 1.39 in the near term, with the CAD underperforming its peers as its relative appeal fades due to greater uncertainty around other central banks' policy paths and a season of carry trades. This view is based on the genuine upside surprise in US payrolls and the downside surprise in Canada.