Canada and US post weak job numbers, Canadian dollar steady

[Ben Graham]

The Canadian dollar is showing little movement at the start of the week. In the European session, USD/CAD is trading at 1.3820, down 0.06% on the day.

Canada's employment sinks

Canada's labor market is deteriorating quickly. In August, employment slipped by 65.5 thousand, the sharpest decline since January 2022. This was well off the market estimate of a 7.5 thousand gain and following the July reading of -40.8 thousand. That's the loss of over 100 thousand jobs in just two months. The massive loss of jobs has been driven by the US-Canada trade war, as many Canadian products have been slapped with 35% tariffs.

There was more bad news, as the unemployment rate jumped to 7.1% from 6.9% in July, higher than the market estimate of 7.0%. This marked the highest unemployment rate since August 2021.

The Bank of Canada will be concerned with the weak job numbers, which support the case for a rate cut. However, with core CPI around 3%, well above the 2% target, the Bank of Canada is hesitant to lower rates. The next inflation report comes out a day before the September 17 rate meeting, and could determine whether the BoC holds or cuts rates.

US nonfarm payrolls fall to 22 thousand

US nonfarm payrolls disappointed with a marginal gain of 22 thousand, well below the upwardly revised gain of 79 thousand in July and the market estimate of 75 thousand. The unemployment rate edged up to 4.3% from 4.2%, the highest level since December 2021.

The money markets responded to the weak nonfarm payrolls report by fully pricing in a rate cut at next week's meeting, with a 90% probability of a quarter-point cut and a 10% chance of a half-point cut, according to CME's FedWatch. Prior to the jobs release, there was a 0% chance of a half-point cut.

USD/CAD Technical

USD/CAD has pushed below support at 1.3830 and is testing support at 1.3821

1.3843 and 1.3852 are the next resistance lines

USDCAD 4-Hour Chart, September 8, 2025

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