Statistics Canada reported Friday that the unemployment rate fell to 6.5% in November, much lower than markets had expected.
Employment rose unexpectedly by 53.6K jobs, on top of the large jump of 66.6K jobs recorded in October. Additionally, the participation rate fell from 65.3% to 65.1%, and wages are still growing at a 4.0% annual rate, unchanged from the previous month.
Market reaction
The Canadian Dollar (CAD) maintains its positive bias after the publication of the jobs report on Friday, pushing the USD/CAD pair to the 1.3900 region, levels last visited in late September.
Canadian dollar price today
The table below shows the percentage change in the Canadian Dollar (CAD) against the major currencies listed today. The Canadian dollar was the strongest against the Japanese yen.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | -0.04% | -0.14% | 0.06% | -0.34% | -0.42% | -0.24% | -0.05% | |
| euro | 0.04% | -0.11% | 0.09% | -0.30% | -0.38% | -0.20% | -0.01% | |
| GBP | 0.14% | 0.11% | 0.19% | -0.19% | -0.27% | -0.09% | 0.10% | |
| JPY | -0.06% | -0.09% | -0.19% | -0.38% | -0.47% | -0.30% | -0.10% | |
| Canadian | 0.34% | 0.30% | 0.19% | 0.38% | -0.09% | 0.09% | 0.30% | |
| Australian dollar | 0.42% | 0.38% | 0.27% | 0.47% | 0.09% | 0.18% | 0.37% | |
| New Zealand dollar | 0.24% | 0.20% | 0.09% | 0.30% | -0.09% | -0.18% | 0.19% | |
| Swiss franc | 0.05% | 0.00% | -0.10% | 0.10% | -0.30% | -0.37% | -0.19% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select the Canadian dollar from the left column and move along the horizontal line to the US dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
This section below was published as a preview of the Canadian Labor Market Report at 07:00 GMT.
- Canada’s unemployment rate is expected to rise in November.
- Additional cooling of the labor market could reinforce additional interest rate cuts.
- The Canadian dollar is maintaining its recovery so far this week.
Statistics Canada will release its labor force survey on Friday, and markets are bracing for a weak reading. The unemployment rate is expected to rise to 7% in November, while employment change is expected to remain flat after good gains in October.
A weaker report could strengthen the Bank of Canada’s (BoC) case to continue its easing cycle next week after cutting interest rates by 25 basis points to 2.25% at its meeting on October 29, following a September rate cut.
The Bank of Canada cut its benchmark interest rate by 25 basis points to 2.25% in late October; No surprises there. In addition, policymakers said they believe interest rates are now roughly where they need to be to keep inflation near target while still giving the economy a little support as it works through the fallout from the U.S.-led trade war.
Markets do not expect the central bank to cut interest rates next week, while implied rates point to a marginal tightening by the end of 2026.
What can we expect from the next Canadian unemployment rate report?
The consensus among market participants expects Canada’s unemployment rate to rise slightly to 7% last month, compared to 6.9% in October. Additionally, investors expect that the economy will not add any jobs in November, reflecting the increase of 66.6K in October. It is worth noting that average hourly wages rose at an annual rate of 4% in October, indicating steady wage inflation.
According to analysts at TD Securities: “The November jobs report will provide the main risk of events this week, as TD and the market look to the labor market to regain some recent strength with the unemployment rate rising to 7.0%.”
When will Canada’s unemployment rate be released, and how could it affect the USD/CAD?
All eyes in Canada will be on Friday’s GDP report, scheduled for release at 1:30 GMT. A strong reading could give the Canadian Dollar (CAD) a quick boost, but don’t expect fireworks.
The USD/CAD pair has seen a steady decline almost entirely in line with the US dollar (USD) recently, and the timing of further easing by the Federal Reserve (Fed) continues to be a story.
Pablo Piovano, Senior Analyst at FXStreet, notes that the Canadian dollar has regained some strength since its lows late the previous month, pushing USD/CAD below the key support level at 1.4000. It also indicates that the technical setup is still leaning towards further losses if the spot price manages to cross the key 200-day simple moving average at 1.3913.
From here, Piovano says a return to bullish momentum could push USD/CAD higher to test the November high at 1.4140 (November 5), and if that is broken, the next target will be the April high at 1.4414 (April 1).
On the flip side, it highlights initial support at the December low at 1.3925 (Dec 4), followed by the 200-day simple moving average. A clean break lower would put the October base at 1.3887 (Oct 29) on the radar, ahead of the September low at 1.3726 (Sept 17) and the July valley at 1.3556 (July 3).
“Momentum favors further declines,” he adds, noting that the Relative Strength Index (RSI) hovering near 40 and the Average Directional Index (ADX) near 21 indicate that the underlying trend appears to be gaining momentum.
Bank of Canada FAQs
The Bank of Canada (BoC), headquartered in Ottawa, is the institution that sets interest rates and manages Canada’s monetary policy. It does this at eight scheduled meetings annually and ad hoc emergency meetings held as appropriate. The Bank of Canada’s primary mandate is to maintain price stability, which means keeping inflation at a level of 1-3%. The main tool for achieving this is raising or lowering interest rates. Relatively high interest rates usually lead to a stronger Canadian Dollar (CAD) and vice versa. Other tools used include quantitative easing and tightening.
In extreme cases, the Bank of Canada can enact a policy tool called quantitative easing. Quantitative easing is the process by which the Bank of Canada prints Canadian dollars for the purpose of purchasing assets—usually government or corporate bonds—from financial institutions. Quantitative easing usually leads to a weaker Canadian dollar. Quantitative easing is considered a last resort when simply lowering interest rates is unlikely to achieve the goal of price stability. The Bank of Canada used this measure during the Great Financial Crisis of 2009-2011 when credit froze after banks lost confidence in each other’s ability to repay debts.
Quantitative tightening (QT) is the opposite of quantitative easing. It is implemented after quantitative easing when the economic recovery is underway and inflation begins to rise. Whereas in QE, the Bank of Canada buys government and corporate bonds from financial institutions to provide them with liquidity, in QE, the Bank of Canada stops purchasing any more assets, and stops reinvesting the capital owed on the bonds it already holds. It is usually positive (or bullish) for the Canadian dollar.
Frequently asked questions about interest rates
Interest rates are charged by financial institutions on loans made to borrowers and are paid as interest to savers and depositors. They are affected by base lending rates, which are set by central banks in response to changes in the economy. Central banks typically have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below the target, the central bank may lower key lending rates, with the aim of stimulating lending and boosting the economy. If inflation rises significantly above 2%, this usually results in the central bank raising key lending rates in an attempt to reduce inflation.
Higher interest rates generally help strengthen a country’s currency because they make it a more attractive place for global investors to put their money.
High interest rates generally affect the price of gold because they increase the opportunity cost of holding gold rather than investing in interest-bearing assets or putting cash in the bank. If interest rates are high this usually causes the price of the US dollar (USD) to rise, and since gold is priced in dollars, this has the effect of lowering the price of gold.
The federal funds rate is the overnight interest rate at which U.S. banks lend to each other. It is the key rate that is frequently set by the Federal Reserve at FOMC meetings. It is set as a range, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the quoted figure. Market expectations of the future federal funds rate are tracked by the CME FedWatch tool, which maps how many financial markets will behave in anticipation of the Federal Reserve’s future monetary policy decisions.
