CAD: Jobs data and cautious BoC cap downside in USD/CAD – ING

Francesco Pesole highlights that Canada’s June jobs report is expected to show slower hiring and steady unemployment, with focus on wage growth. ING believes the bar for a hawkish Bank of Canada shift is high given a benign inflation outlook and USMCA-related risks, yet notes that revived BoC hawkish bets and firmer Oil are supporting CAD and limiting prospects for USD/CAD to drop below 1.40 in coming months.

BoC seen staying cautious on hikes

"We think the bar for a material hawkish turn by the Bank of Canada is high, and we don’t expect surprises at next week’s meeting. Unless oil rallies back to April-May levels, the inflation outlook remains too benign to hike, especially considering downside risks for jobs and activity related to USMCA uncertainty."

"For now, some revamped BoC hawkish bets and some support for oil prices are helping CAD, which is outpacing USD this week. We still think USMCA-related risk premium can be added throughout 3Q and don’t expect a return below 1.40 in the next couple of months."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)