Canadian Dollar Weakens as Soft Jobs Data Dims Higher Rate Bets

The Canadian dollar sank to its weakest level since April 2025 after a softer-than-expected reading of the nation’s labor market reduced the odds of an interest-rate increase by the Bank of Canada.

The loonie fell as much as 0.5% against its US counterpart on Friday to 1.4299 per dollar, the weakest level since US President Donald Trump’s sweeping tariff announcement disrupted markets last year. Canadian bonds rallied, sending two-year yields down to a one-month low after new data showed employment in Canada fell by 68,300 last month, more than erasing previous job gains this year.

“Canadian employment figures came in much softer than expected this morning, driving down the likelihood of a hike from the BOC this year and putting the loonie under meaningful pressure,” said Andrew Hazlett, a foreign-exchange trader at Monex Inc.

Prior to the September jobs data, traders fully priced in a rate hike for December, largely fueled by inflation concerns. Ongoing war in the Middle East has been driving up energy prices.

The weak labor numbers provided an initial sign of how US tariffs have weighed on the Canadian economy. The unemployment rate edged higher to 6.5% in September from 6.4% in August, Statistics Canada reported on Friday.

“The rise in the unemployment rate is an indication that the labor market is under strain and slack in the real economy remains sizeable,” said Bipan Rai of BMO Asset Management. “That has curbed some of the tightening priced into the December BOC date, but we still have two more reports until then and employment figures are notoriously volatile in Canada.”