USD/CAD remains rangebound as markets await Canada’s August labor report, with unemployment seen edging up to 7.0%. Softer labor conditions could bolster expectations for a 50bps Bank of Canada rate cut by year-end, pressuring CAD, particularly against AUD, as the RBA stays cautious on easing, BBH FX analysts report.

BOC cut bets build as unemployment rises

"USD/CAD is trading near the middle of a one month 1.3720-1.3925 range. Canada’s August labor force survey is the domestic highlight (1:30pm London, 8:30am New York). The economy is expected to add just 5k jobs in August vs. -40.8k in July and the unemployment rate is forecast to rise to 7.0% vs. 6.9% in July."

"Softening labor market conditions suggest there is scope for the swaps curve to price-in a greater probability of a 50bps BOC policy rate cut by year-end to 2.25%. If so, CAD underperformance will likely be clearer versus AUD than USD. The RBA is on track to ease more cautiously than the Fed and global economic activity is resilient."