Canadian Dollar: Labour strength and BoC stance – TD Securities
TD Securities economists Robert Both and Emma Lawrence highlight a strong Canadian labour market, with July employment up 75k and unemployment at 6.4%.
TD Securities' economists Robert Both and Emma Lawrence emphasize a robust Canadian labour market in July, reporting a 75k jobs increase and unemployment at 6.4%, the lowest since 2024. Despite surpassing expectations, the Bank of Canada is expected to maintain a wait-and-see approach through 2026, with a potential shift to neutral policy by early 2027.
The Canadian labour market's strength is evident with private sector job growth and balanced full/part-time employment, though wage growth slowed to 3.0% year-over-year due to base effects. While the unemployment rate is high, core inflation remains below 2%, allowing the Bank to remain patient. The Canadian dollar (CAD) is influenced by central-bank divergence and domestic economic conditions, with USD/CAD briefly dipping below 1.40, but the bearish momentum may fade if US CPI surprises lower.
US economic sanctions on Iran's energy prices are causing volatility in the USD on Monday. Meanwhile, gold (XAU/USD) continues its upward trend, nearing $4,650, and gold's strong performance is attributed to the US Treasury's increased liquidity support buyback operations.
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