The Canadian jobs report showed a loss of 40,800 jobs in July, much worse than the expected gain of 13,500. This follows the previous gain of 83,100 jobs, highlighting a significant downturn when gains were expected. The unemployment rate remained steady at 6.9%, which is slightly better than the forecasted 7.0%. However, this stability occurs in a generally weak job market.

Full-Time Employment Drop

Full-time jobs dropped by 51,000, compared to an increase of 13,500 before. Part-time jobs increased by 10,300, but this was not enough to offset the full-time losses. The participation rate fell to 65.2% from 65.4%, indicating fewer people are engaging in the labor market. This situation casts a shadow on Canada’s job landscape despite the unchanged unemployment rate. The USDCAD exchange rate moved slightly higher and is now hitting a resistance level. Traders consider key support and resistance levels to guide market trends and strategies. Today is August 8, 2025. The sudden loss of 40,800 jobs in Canada is a major warning sign for the market. This significant drop contrasts sharply with the expected gain of 13,500, suggesting the Canadian economy is slowing down more quickly than anticipated.

Bank of Canada Under Pressure

This job decline, particularly the loss of 51,000 full-time positions, puts pressure on the Bank of Canada. We believe this report greatly reduces the chances of further interest rate hikes this year. Now, all eyes are on the possibility of a rate cut before the year ends. Canada’s latest inflation report for July 2025 still shows CPI at 2.8%, above the central bank’s goal. However, this disappointing jobs report is likely to overshadow inflation concerns for policymakers. The declining participation rate further reveals an underlying weakness that must be addressed. This stands in stark contrast to the United States, where recent non-farm payrolls show ongoing job growth and stable wages. The fundamental difference supports a stronger US dollar compared to the Canadian dollar. Additionally, WTI crude oil prices have struggled to stay above $75 a barrel, adding more pressure on the loonie. Back in late 2023, the Bank of Canada responded to similar labor market issues by adopting a cautious stance, leading to rate cuts in 2024. This suggests the central bank will take this report very seriously, making the upcoming policy meeting in September crucial. For derivative traders, this outlook favors strategies that profit from a rising USDCAD. Buying call options on USDCAD can allow speculation on further increases while managing risk. The rising uncertainty may lead to increased implied volatility, making options pricing more fluid. The currency pair is currently testing a resistance level, so a sudden breakout is not guaranteed. Traders might look into bull call spreads to lower their entry costs, targeting the 1.3900 level reached earlier this year. It’s important to closely monitor upcoming retail sales and inflation data for confirmation of this economic slowdown. Create your live VT Markets account and start trading now.

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