Canadian dollar slides after Canada jobs drop; Fed hike odds rise

The Canadian dollar weakened to around 1.39 per USD following the release of domestic and US employment data.

Employment in Canada declined by 41,700 in August, missing expectations for a 15,000 increase and following a 75,100 gain in July.

The weak labor data could support a more dovish stance from the BoC.

Meanwhile, US payrolls increased by 162,000, about three times the consensus estimate.

The strong report boosted expectations for a September Fed rate hike.

This backdrop could widen the interest-rate differential between the US and Canada, favoring the US dollar over the loonie.

The BoC kept its key policy rate unchanged at 2.25% at its September meeting, as widely expected.

However, it noted that inflation risks had increased, while new tariffs had made the growth outlook more uncertain.

The BoC left the future path of monetary policy open, saying it would adjust policy as needed.

Governor Macklem said policymakers were prepared to raise rates if inflation remained elevated.