FX.co ★ Canadian Dollar Rises to 2-Month Highs After Unemployment

The Canadian dollar recently strengthened beyond 1.39 per US dollar, reaching its highest levels in two months. This change was driven by an unexpectedly robust labor report, which influenced the domestic monetary policy outlook. Simultaneously, the US dollar experienced a weakening trend. For November, unemployment in Canada unexpectedly declined to 6.5%, marking a 16-month low, as the number of unemployed individuals decreased by approximately 80,000, bringing the total to about 1.5 million. This data indicates a significant turnaround from the increase in unemployment observed in the spring and suggests diminishing domestic economic slack. The strong performance in payrolls increases the likelihood that the Bank of Canada might pause its rate cuts following the reduction in October. Bank officials have emphasized their commitment to being data-driven and have indicated that they will halt easing measures if economic activity and inflation are more robust than anticipated. Meanwhile, market expectations have shifted, anticipating a near-certain rate cut by the Federal Reserve in December, with further rate reductions projected for the next year, contributing to the pressure on the US dollar.