Canadian Dollar: Jobs and BoC caution shape outlook – ING

ING’s Francesco Pesole highlights that Canada’s June jobs report is expected to show a sharp slowdown in hiring and a pickup in wage growth. He argues the bar for a hawkish shift by the Bank of Canada (BoC) remains high, with benign inflation and USMCA-related risks limiting hike prospects. ING sees CAD supported near term but does not expect USD/CAD below 1.40 in coming months.

Data and policy temper Loonie upside

"Canada releases jobs data for June today. Expectations are for a marked slowdown in hiring to 10k after May’s big 88k, with unemployment staying at 6.6%. The focus will be on permanent employees’ hourly wages, which are expected to increase from 3.2% to 3.6%."

"We think the bar for a material hawkish turn by the Bank of Canada is high, and we don’t expect surprises at next week’s meeting. Unless oil rallies back to April-May levels, the inflation outlook remains too benign to hike, especially considering downside risks for jobs and activity related to USMCA uncertainty."

"For now, some revamped BoC hawkish bets and some support for oil prices are helping CAD, which is outpacing USD this week. We still think USMCA-related risk premium can be added throughout 3Q and don’t expect a return below 1.40 [USD/CAD] in the next couple of months."