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Canada jobs slowdown and BoC caution seen limiting CAD gains

ING expects the hiring slowdown to lift wage growth while leaving inflation too benign for a hawkish BoC shift, keeping USD/CAD above 1.40 for months.

Reported · Written up by our desk · Major Pairs

ING’s Francesco Pesole said Canada’s June jobs report is expected to show a sharp slowdown in hiring, with the number of jobs added to fall to 10k after May’s 88k, while the unemployment rate is seen steady at 6.6%. He also pointed to a pickup in pay, with hourly wage growth expected to rise from 3.2% to 3.6%.

Pesole argued that the threshold for the Bank of Canada to turn more hawkish remains high, citing benign inflation and risks to jobs and activity tied to USMCA uncertainty. He said those factors make it unlikely the BoC will deliver a material hawkish surprise at its next meeting.

ING expects CAD to receive near term support, with some offset from risks to oil prices, but it does not expect USD/CAD to fall below 1.40 over the coming months. The view is that USMCA-related risk premium could add through the third quarter, limiting scope for a stronger CAD trend.

FXStreet summarized the call as a setup where the main catalyst is the labor-market data, which could shift the focus toward wages without changing the overall inflation backdrop enough to lift the BoC’s willingness to hike.

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