ING’s Francesco Pesole points to Canada’s March labour report as key for Bank of Canada (BoC) expectations, stressing that the unemployment rate matters more than volatile monthly payrolls. With markets pricing about 40bp of tightening by December despite limited BoC appetite for hikes, he sees risks to Canadian Dollar (CAD) front-end rates as dovish and expects USD/CAD to drift toward 1.3700 on continued de‑escalation.

Labour data and rates shape USD/CAD

"Canada releases jobs data for March today. Consensus is for a +15k payroll change after the very soft -83k February print."

"But the bigger signal for the Bank of Canada tends to come from the unemployment rate rather than the quite volatile monthly jobs swings."

"In our view, risks for CAD front-end rates are skewed to the dovish side in the coming weeks."

"Markets are pricing around 40bp of tightening by December, which looks too aggressive considering the BoC has not signalled much appetite for hikes, and attention may soon shift to USMCA renegotiations – a major downside risk for Canada’s activity and jobs."

"USD/CAD remains dominated by war headlines for now, and continued de‑escalation should allow a move to 1.3700."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)