In the opinion of economists at Commerzbank, the tight labour market in Canada supports a restrictive Bank of Canada (BoC) course. Subsequently, only markedly strong future price and economic data would be able to lift the loonie.

BoC to maintain its tougher approach for now

“The labour market in Canada is getting increasingly tight. A surprisingly large number of new jobs was created in May, the unemployment rate eased to 5.1%. That suggests that the BoC will maintain its tougher approach for now.”

“The fact that the situation on the labour market becomes tighter unabated points towards a further 50 bps step in July. After that, the BoC might operate slightly more slowly but is likely to make this dependent on the data situation. This is why the market still sees a high likelihood of a 50 bps in September following the May labour market report.”

“Future price and economic data would have to surprise markedly positively to provide new, significant upside potential for CAD in view of already high expectations.”