Canada Employment Data Misses Expectations, Stoking Economic Concerns; Loonie Poised for Biggest Weekly Drop Since Late September

Canada's employment data missed market expectations, heightening concerns about the country's economic trajectory, with the loonie likely to post its biggest weekly decline since late September. The Canadian dollar has already fallen 0.7%, and amid a broader environment of a strengthening U.S. dollar, it has weakened notably, with cumulative weekly losses potentially reaching 1.1%. The latest employment figures showed Canada's unemployment rate edged up to 6.7% in October, with employment falling by 4,700 jobs—marking the third consecutive monthly decline in the country's employment data, which extended the loonie's prior downtrend. At the same time Canada released its October employment data, the U.S. also disclosed its October jobs figures, which beat market expectations, further boosting bets on a Federal Reserve rate hike next month. Sarah Ying, head of FX strategy at Canadian Imperial Bank of Commerce (CIBC), noted that this employment report has a clearly negative impact on the loonie, with weakness in full-time positions and private-sector employment indicating that the underlying labor market is softening. Going forward, interest rate expectations between Canada and the U.S. are set to diverge further, with risks for USD/CAD still tilted to the upside, corresponding to further room for the loonie to weaken.