The USD/CAD pair traded near 1.3862 on Friday, up roughly 0.5% for the session after earlier trading below the 1.38 level. The move follows a sharp divergence in labour market data between Canada and the United States.
Statistics Canada reported that the Canadian economy shed 41,700 jobs in August, far missing expectations for a modest gain of about 15,000. The unemployment rate held at 6.4% and the employment‑to‑population ratio slipped to 60.8%, down 0.1 percentage point. Job losses were concentrated among younger workers, who lost 19,000 positions, and core‑aged workers, who lost 16,000. While services‑producing industries shed jobs, manufacturing posted a gain of 22,000. Average hourly wages rose 2% year‑on‑year, a slowdown from the 2.8% increase recorded in July.
In contrast, the U.S. labour market remained robust, with non‑farm payrolls rising by 162,000 in August and the unemployment rate steady at 4.1%.
Alex Tsepaev, chief strategy officer at B2PRIME Group, said the unexpected Canadian job losses increase pressure on the loonie and could limit the Bank of Canada's ability to adopt a more hawkish stance. He added that the strong U.S. payrolls boost the likelihood of the Federal Reserve keeping rates elevated, widening the rate‑differential advantage for the dollar.
Statistics Canada also warned that sectors dependent on U.S. export demand face heightened uncertainty amid new U.S. tariffs, adding trade‑sensitivity risks. Prior to the reports, the Canadian dollar had been gaining on weaker U.S. dollar momentum and supportive oil prices, but the labour‑data shock reversed that trend.
The divergence in employment data underscores the differing monetary‑policy outlooks for the Bank of Canada and the Federal Reserve, a factor that market participants will monitor closely as the loonie seeks support.
