If you felt the Canadian dollar wobble, you weren't imagining it. A weaker-than-expected labor update trimmed the chances of a Bank of Canada hike this year and knocked the currency lower. On Friday, the loonie touched 1.4299 per US dollar, down as much as 0.5%.
That put it at territory last seen in April 2025 and as weak as levels reached when US President Donald Trump's sweeping tariff move rattled markets last year. Bonds jumped, pulling two-year yields to a one-month low.
Statistics Canada said employment fell by 68,300 in September, a decline that more than unwound the year's earlier job gains. The jobless rate ticked up to 6.5% from 6.4% in August. "Canadian employment figures came in much softer than expected this morning, driving down the likelihood of a hike from the BOC this year and putting the loonie under meaningful pressure," according to Andrew Hazlett, a foreign-exchange trader with Monex Inc. Going in, traders had fully priced in a December hike, largely on inflation worries.
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Higher energy costs tied to the ongoing war in the Middle East have fanned inflation concerns. At the same time, the weak labor reading offered an early sign that US tariffs have been weighing on Canada's economy. "The rise in the unemployment rate is an indication that the labor market is under strain and slack in the real economy remains sizeable," said Bipan Rai of BMO Asset Management. "That has curbed some of the tightening priced into the December BOC date, but we still have two more reports until then and employment figures are notoriously volatile in Canada."
With fewer hikes being priced in, the currency softened and short-term yields slipped. Inflation worries haven't vanished, but growth cracks are getting harder to ignore. There are still two labor updates before December, and Canada's payrolls data can swing, so travelers, cross-border shoppers, and anyone earning or spending in loonie terms will notice the push and pull most.
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