The Canadian labour market report for July, released on Friday, once again underlined why the Bank of Canada (BoC) has now cut interest rates for the second time. Instead of the moderate job growth that economists had been expecting, we saw job losses (albeit very small ones) for the second month in a row, Commerzbank’s FX strategist Michael Pfister notes.

BoC to make its next cut in September

“No comparison with previous months, when the labour market appeared somewhat more robust. The unemployment rate only stopped rising because the participation rate surprisingly fell – which is also not a good sign for the Canadian labour market.”

“With figures like these, it should be easy for the BoC to cut rates further in the coming months. It was already clear from the minutes of the last meeting that policymakers are concerned that the labour market is cooling too much.”

“As such, there is a strong case to be made that the BoC will make its next cut in September – cat least as long as next week's inflation figures do not show an unexpected rise. As a result, the CAD is likely to remain under pressure.”