Canadian Dollar stares at 114.7K lost jobs and a Fed rate hike

The Canadian Dollar (CAD) faces pressure from two directions. Canada's labour market continued to deteriorate, while job creation in the United States (US) significantly exceeded expectations, strengthening market bets on another interest rate hike by the Federal Reserve (Fed).

Canada lost 114.7K jobs in three months, a warning sign difficult to ignore Canada's labour market is experiencing a prolonged period of weakness.

Meanwhile, the Unemployment Rate rose to 6.7% from 6.5% in September, reaching its highest level in six months.

Young workers are particularly affected, with their Unemployment Rate climbing to 13.7% from 13%.

On October 28, the central bank raised its benchmark interest rate by 25 basis points (bps) to 2.5%, delivering its first hike in more than three years.

In a note cited by The Canadian Press, he states: “Ultimately, this adds to our conviction that the bank will hike rates no more than twice more as a precaution against upside inflation risks, before calling it a day.”Financial markets are also beginning to reflect this shift in expectations.

The Unemployment Rate fell to 4.1% from 4.2% in September.

Nevertheless, robust employment gives the Fed greater flexibility to maintain restrictive monetary policy or raise interest rates further if price pressures persist.

According to the CME FedWatch tool, markets now assign nearly an 80% chance to a 25-basis-point interest rate hike in December, up from around 70% the previous day.