The latest hiring contraction and rise in unemployment to 6.2% in Canada has put a July Bank of Canada rate cut on the table, ING’s FX analyst Francesco Pesole notes.

CAD to continue to underperform

“Our latest forecast saw Bank of Canada cuts in September, October and December. But the latest hiring contraction and rise in unemployment to 6.2% has put a July cut on the table.”

“Markets are pricing in 16bp of easing for July: we think the deciding factor will be the June inflation report on 16 July, after May’s figures came in a bit higher than expected.”

“Still, market pricing for total BoC easing in 2024 looks conservative: 55bp versus our call for 75bp. There is therefore ample room for dovish repricing along the way. We think CAD will continue to underperform other commodity currencies due the domestic story and its lower sensitivity to a decline in USD rates.”