Statistics Canada will release its Labour Force Survey on Friday, with markets bracing for a mixed set of data. The unemployment rate is expected to inch up to 7.2% in September, while employment is projected to rise by 5,000 new jobs, following a sharp decline in August.
A weaker report could reinforce expectations that the Bank of Canada (BoC) will continue easing monetary policy after cutting its benchmark rate by 25 basis points to 2.50% on September 17, ending a streak of three consecutive pauses.
BoC maintains cautious tone
At the post-meeting press conference, Governor Tiff Macklem emphasized that the inflation outlook remains largely unchanged since January, with the central bank taking a data-dependent approach and making decisions “one meeting at a time.” He acknowledged that price pressures appear somewhat more contained but stressed that policymakers remain ready to act should risks resurface.
Senior Deputy Governor Carolyn Rogers reiterated that no change in the deposit rate is being considered, while Macklem dismissed any discussion of renewed quantitative easing (QE). The governor also downplayed recession risks, forecasting around 1% growth in H2 2025. Overall, the tone suggested patience as the BoC waits for clearer signs of inflation moderation.
Canadian labor market trends
In August, Canada’s unemployment rate rose to 7.1%, while total employment declined for the second straight month, shedding 65,500 jobs. Average hourly wages, a key gauge of wage inflation, climbed 3.6% year-over-year, slightly higher than July’s 3.5%.
For September, consensus forecasts point to a mild uptick in the unemployment rate to 7.2%, alongside a modest rebound of 5,000 jobs. Analysts at TD Securities said, “We look for employment to rise by 5K in September for a muted rebound after two months of heavy layoffs. Service sector hiring should drive the headline print alongside a mixed performance for goods-producing industries.”
Impact on USD/CAD
The Labour Force Survey and unemployment rate data are due at 12:30 GMT on Friday. Markets currently price in a 70% chance of another quarter-point BoC rate cut at the October 29 meeting, with around 25 basis points of total easing expected by year-end. A weaker-than-expected labor report could bolster the case for further rate cuts, weighing on the Canadian Dollar (CAD).
According to FXStreet’s Senior Analyst Pablo Piovano, USD/CAD has remained in a consolidative phase since late September, capped below the 1.4000 resistance zone. He highlights key resistance levels at 1.3986 (October 2), 1.4015 (May 13), and 1.4414 (April 1), while initial support lies at 1.3822 (55-day SMA), 1.3761 (100-day SMA), and 1.3726 (September 17 low).
Piovano notes that “momentum indicators lean bullish: the RSI is above 62, and the ADX near 24 suggests a firm trend.” This technical setup implies that further USD strength remains possible if upcoming data confirm economic softness in Canada.
