Yesterday, Bank of Canada governor Tiff Macklem said more data is needed before moving to shifting to an interest rate pause. Today he will get it, with Canadian jobs to be released alongside non-farm payrolls.
Unlike in the US, Canadian jobs have showed a material deterioration in the past few months. The data is notoriously volatile but there have been three months in a row of losses near 40K. For those who follow the US, a rule of thumb is to multiply by 10, so this would be the equivalent of three months in a row of non-farm payrolls of -400K.
The consensus today is +20.0K.
The unemployment rate has ticked up to 5.4% from 4.9% and is expected to stay there.
As always, the breakdown of full-time and part-time jobs is an important consideration for Canada. Last month there were 77..2K full time job losses, which was the worst since January.
The Canadian dollar has recently broken down to the lowest levels since May 2020 and the next leg depends on what the BOC does next. A quick pivot is unlikely as Macklem said yesterday that more rate hikes "will be needed" and market pricing for a 50 bps hike on Oct 26 is 98%, which would take rates to 3.75%.
From there, a likely path is for the BOC to slow to 25 bps and then pause at year end. A big surprise in today's jobs report could change the equation but if you're trading USD/CAD, it will be challenging with the US report due at the same time.
