FX.co ★ Canadian Dollar Eases After Labor Market Data

In early June, the Canadian dollar hovered around 1.37 Canadian dollars per US dollar, close to its eight-month high of 1.367 recorded on June 5th. This movement reflects a combination of weaker domestic economic indicators and a stronger US currency. In May, Canada's labor market experienced a slowdown, with only 8,800 jobs added and the unemployment rate inching up to 7%, the highest since late 2021. This increase highlights pressure from US tariffs on aluminum, steel, and autos impacting manufacturers. These labor market challenges contrast with previous signs of economic resilience, such as 2.2% GDP growth in the first quarter and successive gains in retail sales, which led the Bank of Canada to maintain its policy rate at 2.75% with no hints of immediate reductions. Concurrently, ongoing and dynamic trade negotiations between Ottawa and Washington have yet to alleviate concerns about potential broader trade disruptions, making export-reliant sectors vulnerable. Simultaneously, the US dollar gained strength following slightly better-than-expected performance in May's nonfarm payrolls, further limiting gains for the Canadian dollar.