USD/CAD to move upwards as rate hike expectations for BoC and Fed diverge further – Commerzbank

The September labour market data for Canada will be published later in the day. In the view of economists at Commerzbank, the loonie is set to remain under pressure amid continued divergence in rate expectations between the Bank of Canada and the Federal Reserve.

Little hope of the loonie making up ground against USD

“The combination of a strong US labour market and weak labour market data for Canada would probably cause the rate hike expectations for the two central banks to diverge further, driving USD/CAD upwards.”

“The market is likely to lower its rate hike expectations in case of a weak labour market report. In case of a positive labour market surprise, it is likely to adjust them to the upside. However, it seems unlikely to us that the expectations are likely to catch up with those for Fed rate hikes, in particular as we expect a solid US labour market report.”

“We continue to see little hope of the loonie making up ground against USD today in view of a continued divergence in rate expectations, instead it is more likely to record losses.”

See: 

• NFP Preview: Forecasts from nine major banks, employment trend slows down
• Canadian Jobs Preview: Forecasts from six major banks, employment to rise but outlook is dimming