Canadian Dollar Faces Tariff Risks Amid Strong Labour Market Data
Canada's economy is showing signs of recovery, according to Michael Pfister at Commerzbank. The country's labour market is strong, with a surprising increase in new jobs and a low unemployment rate.
In contrast to the US labour market, Canada created 75,000 new jobs, exceeding the median Bloomberg consensus forecast of 20,000. This led to an unexpected decline in the unemployment rate to 6.4%, its lowest level in two years.
However, this recovery is fragile due to threatened US tariffs on Canadian goods. The US president has announced a 50% tariff on certain Canadian goods if no agreement is reached by August 19th.
Pfister remains optimistic that an agreement will be reached on a one-year extension of the United States-Mexico-Canada Agreement (USMCA), which would likely stabilize the Canadian dollar. But he warns that any diversification away from the US will take time, and the Canadian dollar's appreciation is likely to be a long and bumpy road.