During the European session, the only data released will be from Swiss consumer confidence, but it is not expected to impact the market significantly. In the American session, the focus shifts to the Canadian employment report. Analysts predict that 13,500 jobs will be added in July, a big drop from the 83,100 jobs added previously. The unemployment rate is expected to rise from 6.9% to 7.0%.

Bank of Canada Holds Steady

The Bank of Canada has stopped making changes as inflation is back near the high end of their 1-3% target. Current data does not show a need for additional rate cuts right now. The market sees a 61% chance of a rate cut in December. Unless upcoming data shows major surprises, this expectation is unlikely to change much. With the focus on North America today, August 8, 2025, the Canadian employment report is central. The forecast is for a modest report, with only 13,500 new jobs expected—a significant decline from last month’s total. This suggests that unless the numbers vary greatly, the market reaction may be muted. Since little volatility is expected in today’s data release, implied volatility for Canadian dollar options might decrease if the numbers match forecasts. Traders might find an opportunity to sell volatility using strategies like short straddles on the USD/CAD pair. The goal would be to earn the premium as option values decline in a stable market.

Market Strategies in Focus

This viewpoint aligns with the Bank of Canada’s current policy of holding steady. With the latest Consumer Price Index (CPI) inflation figures for July 2025 at 2.9%, inflation is at the upper end of the Bank’s target range. This leaves little reason to signal a near-term rate cut, stabilizing the currency for the moment. However, a surprising drop in jobs, such as a negative employment report, could change things quickly. This would likely increase the current 61% likelihood of a December rate cut and might even push it earlier. In that case, we could see the Canadian dollar weaken, making long USD/CAD positions or buying CAD put options smart strategies. Conversely, a strong jobs report could have a greater impact by challenging the dovish outlook. A quick look back to spring 2025 shows how a surprise surge in jobs led to a sharp rally in the Canadian dollar. If this strength repeats, it could wipe out rate cut expectations for the year and push USD/CAD down sharply. In the coming weeks, we’ll closely watch how Bank of Canada officials respond to today’s employment data. The figures will set the tone, but their insights will shape market expectations for the rest of the quarter. Any signs of growing concern about weak growth or ongoing inflation will guide our trading positions. Create your live VT Markets account and start trading now.

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