Canadian jobs data seen softening further in December – ING

December labour data are expected to show a mild contraction in Canadian employment and a rise in unemployment to 6.7%, reinforcing the view that the labour market is gradually loosening and limiting the case for near-term policy tightening by the Bank of Canada, ING’s FX analyst Francesco Pesole notes.

BoC rate hike expectations for 2026 viewed as premature

“Canada releases labour data for December at the same time as the US today. Here, the consensus is less optimistic: -2k for payrolls and an acceleration from 6.5% to 6.7% in unemployment. These jobless levels are still well below the 7.1% September 2025 peak, although the Bank of Canada would start to worry if we re-approach the 7.0% mark.”

“In our view, market pricing for a rate hike in late 2026 looks premature. Inflation isn’t showing worrying signs, the labour market may well loosen further, and the upcoming USMCA renegotiations could dampen consumer and business sentiment again. We no longer expect another rate cut, but we think the next rate hike will need to wait until at least 2027.”

“The Canadian dollar has trailed other G10 currencies this week, with the prospect of a Venezuelan crude supply increase causing some concerns for Canadian oil exports. The WTI-WCS spread has widened to 15$ in the past few days, the widest in a year. Some soft jobs data today may prevent CAD from recovering, and we remain generally unexcited about the loonie’s prospects in the coming months. A return to the 1.39-1.40 area in USD/CAD looks warranted in the current environment.”