Although the major US labour market report was not published on Friday, figures from Canada were released. With roughly 53,000 jobs added in November, the figures were positive once again. As in the previous month, economists surveyed by Bloomberg had expected a slight decline in employment, only to be disappointed once again. Over the past three months, the Canadian economy has created roughly 180,000 jobs, following several months of weak performance, Commerzbank's FX analyst Volkmar Baur notes.

BoC likely to keep rates steady after positive jobs report

"Economists had also expected the unemployment rate to rise slightly to 7%, but it declined significantly to 6.5%. This is partly due to the lower-than-expected participation rate, but also because the labor supply has been growing more slowly for several months. Following the pandemic, there were enormous increases in labor supply, but a shift in policy towards stricter immigration rules has normalized this situation. Consequently, stronger job growth is reflected more quickly in a lower unemployment rate than in 2023/24."

"Unsurprisingly, the Canadian dollar has benefited significantly from these figures. After three months of such positive surprises, it is becoming increasingly difficult to consider this an outlier. Rather, the labor market seems to be indicating that the US tariff shock has been absorbed. It is also helpful that the 10 percentage point increase in US tariffs, announced by the US President following a TV advertisement by the Canadian province of Ontario, has not yet been implemented."

"Prior to the Bank of Canada's (BoC) latest decision in response to the initial positive labor market report, we advocated a wait and see stance, but at that time, the BoC opted for another interest rate cut. However, for the next meeting on Wednesday, there are many indications that interest rates will remain at 2.25%. Decision-makers may even signal that the key interest rate is likely to remain unchanged for the foreseeable future. In such a scenario, the Canadian dollar (CAD) could strengthen again, even though expectations of interest rate hikes in the coming year are already looking optimistic."