The likelihood of the Bank of Canada lowering interest rates this month has decreased to 18% from 27% after job data release.

The likelihood of the Bank of Canada lowering interest rates this month has decreased to 18% from 27% after job data release.

The likelihood of the Bank of Canada lowering interest rates this month has decreased to 18% from 27% after the release of June jobs data [1]. The data, expected to show flat employment growth and a slight rise in the jobless rate to 7.1%, has tempered expectations of an early rate cut. Francesco Pesole, an FX analyst at ING, notes that a soft print could fuel speculation of an earlier rate cut, adding pressure to the Canadian Dollar (CAD) [1].

The June jobs report is anticipated to indicate no change in employment, with the unemployment rate edging up from 7.0% to 7.1%. Recent fiscal tightening poses downside risks, suggesting an increased risk of job losses [1]. A particularly weak jobs print could even spark speculation of a rate cut as early as July 30, according to Pesole [1].

Economists expect the jobless rate to rise to 7.1% last month, with the pace of hiring stalled [3]. Trade-sensitive sectors like manufacturing and transportation have faced job losses due to Canada's tariff dispute with the United States [3]. The June jobs numbers will be the last look the Bank of Canada gets at the labour market before its next interest rate decision on July 30 [3].

The Bank of Canada's decision to deliver an outsized 50-basis-point interest rate cut last week has sparked debate about the necessity of further cuts to head off mortgage renewal risks. While rapid rate cuts can relieve mortgage pressures, they also stoke risks, such as restoking housing demand and weakening the loonie [2]. The Bank must balance the two-sided nature of risks, including the potential for overstimulating the housing market and underestimating the spending impulse [2].

The Bank of Canada's rate cut decision on July 30 will be closely watched by investors and financial professionals. The likelihood of a rate cut has decreased, but the impact of the June jobs data on the Canadian economy and the CAD remains to be seen.

References:
[1] https://www.fxstreet.com/news/canada-jobs-data-eyed-for-rate-cut-clues-ing-202507111109
[2] https://economics.td.com/ca-interest-rate-conundrum
[3] https://ca.finance.yahoo.com/news/economists-expect-jobs-market-flatlined-080010725.html