In October, Canada’s unemployment rate dropped to 6.9%, which surprised analysts, as reported by Statistics Canada. There were 66,600 new jobs added, the Participation Rate climbed to 65.3%, and Average Hourly Wages rose by 4% compared to last year. This news boosted the Canadian Dollar, pushing the USD/CAD below 1.4100, ending a six-day rise. The CAD also showed strong performance against the New Zealand Dollar, gaining ground against several other currencies.

Canadian Labour Market Preview

Before the report, analysts had expected a loss of 2,500 jobs in October, after a gain of 60,400 jobs in September. Current market conditions suggest that a slowdown could negatively impact the CAD, increasing the chances of interest rate cuts by the Bank of Canada. Leading up to the employment data release, the USD/CAD pair was trading around 1.4100, with potential for both upward and downward shifts depending on market reactions. The 20-day Exponential Moving Average indicates a strong short-term bullish trend. The Net Change in Employment affects consumer spending and economic growth. Positive changes in employment generally support the CAD, as they are linked to economic growth and influence decisions by the Bank of Canada. Frequent outperforming of expectations typically strengthens the CAD. The October jobs report released on November 7, 2025, showed unexpected strength, with significant job gains instead of the anticipated small loss. This surprise shifts our outlook on the Bank of Canada’s (BoC) next steps, reducing the likelihood of an interest rate cut in the coming months. This unexpected economic strength may lead to increased volatility in the Canadian dollar. The sudden drop in USD/CAD below 1.4100 is just the first response. Traders might consider using options to position for larger price fluctuations as the market reflects on whether this strong labor data is a one-time occurrence or a trend.

Implications for Interest Rates

This jobs report contrasts with the BoC’s cautious stance from its October 2025 meeting, where officials expressed a readiness to ease policy if economic conditions weakened. With wage growth remaining high at 4% and the latest core inflation rate from Statistics Canada at a stubborn 3.1%, the rationale for cutting rates is now much weaker. Consequently, overnight index swaps indicate that the market sees less than a 20% chance of a rate cut in the BoC’s December meeting. Technically, the USD/CAD breaking the 1.4100 support level is significant. We see a buying opportunity for put options on the pair, targeting strike prices near the 1.4000 psychological level in the coming weeks. This strategy would capitalize on further strengthening of the Canadian dollar against the US dollar. We’ve seen similar scenarios before, notably in 2023, when strong labor data kept central banks from lowering interest rates as much as the market expected. This history suggests that betting against strong economic reports can be risky. This report indicates that the Canadian economy has more underlying momentum than we initially believed. The loonie’s strength is clear not just against the US dollar but also other currencies. The Bank of Japan’s continued accommodative policy throughout 2025 further widens the interest rate gap between Canada and Japan, making long positions in CAD/JPY, possibly through call options, an attractive option. We must remain cautious, as upcoming data from the United States could easily change this outlook. Stronger-than-expected U.S. inflation or job reports could bolster the US dollar and reverse recent movements in USD/CAD. Global risk sentiment is also a concern; the recent performance of the S&P 500 shows some investor unease, which traditionally leads to a stronger US dollar. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now