Canada's job market expected to flatline, Canadian dollar under pressure

Forex

Summary:

The Canadian dollar weakened amid stalled job growth and rising unemployment, with June data expected to show no gains. Markets fear Trump’s 35% tariff may further hurt Canada's economy. USD/CAD climbed to 1.3702.

The Canadian dollar has posted losses in the European session. USD is trading at 1.3702, up 0.34% on the day. Earlier, the Canadian dollar weakened to 1.3731, its lowest level since June 27.

Canada's job growth has stalled

Canada releases the June employment report later today. Job growth has stalled since January and the economy created just 8800 jobs in May. The markets are braced for worse news in June with a consensus of no growth. The unemployment rate has been steadily increasing and is expected to rise to 7.1% from 7.0%, compared to 6.2% a year ago.

The labor market may have stalled but there is some relief that the US tariffs haven't resulted in worse employment numbers. US President Trump threatened on Thursday to impose a punishing 35% tariff rate on Canadian goods, a dramatic escalation in the trade war between the two countries. Canada and the US have been engaged in trade talks but the new round of tariffs are scheduled to take effect on August 1. The tariffs would be damaging for Canada's economy, chilling growth and boosting inflation.

Fed split over interest rate cuts

Will the Federal Reserve lower interest rates at the July 30 meeting? The money markets don't think so, with a 93% probability of a hold, according to the FedWatch CME tool. Still, this week's FOMC minutes from the June meeting indicated that some members are in favor of a July rate cut and the Fed is expected to cut at least once before the end of the year.

Inflation is running at 2.4%, high than the Fed's target of 2%. A key question is how tariffs will impact on inflation - so far, tariffs have not had much effect on inflation but that could change in upcoming inflation reports. The US releases June inflation next week and inflation is expected to tick higher to 2.5%.

USDCAD Technical

USD/CAD has pushed above resistance at 1.3672 and is testing resistance at 1.3691. Above, there is resistance at 1.3726

1.3637 and 1.3718 are the next support levels

Canada's job market expected to flatline, Canadian dollar under pressure_1

USDCAD 1-Day Chart, July 11, 2025

Source: marketpulse

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Warren Takunda

Economic

China–U.S. Trade War

President Donald Trump said in a letter that he will raise taxes on many imported goods from Canada to 35%, deepening a rift between two North American countries that have suffered a debilitating blow to their decades-old alliance.

The Thursday letter to Canadian Prime Minister Mark Carney is an aggressive increase to the top 25% tariff rates that Trump first imposed in March after months of threats. Trump’s tariffs were allegedly in an effort to get Canada to crack down on fentanyl smuggling despite the relatively modest trafficking in the drug from that country. Trump has also expressed frustration with a trade deficit with Canada that largely reflects oil purchases by America.

“I must mention that the flow of Fentanyl is hardly the only challenge we have with Canada, which has many Tariff, and Non-Tariff, Policies and Trade Barriers,” Trump wrote in the letter.

The higher rates would go into effect Aug. 1, creating a tense series of weeks ahead for the global economy as recent gains in the S&P 500 stock index suggest many investors think Trump will ultimately back down on the increases. But stock market futures were down early Friday in a sign that Trump’s wave of tariff letters may be starting to generate concern among investors.

In a social media post, Carney said Canada would continue to work toward a new trade framework with the U.S. and has made “vital progress to stop the scourge of fentanyl.”

“Through the current trade negotiations with the United States, the Canadian government has steadfastly defended our workers and business,” Carney said.

While multiple countries have received tariff letters this week, Canada — America’s second largest trading partner after Mexico — has become something of a foil to Trump. It has imposed retaliatory tariffs on U.S. goods and pushed back on the president’s taunts of making Canada the 51st state. Mexico has also faced 25% tariffs because of fentanyl, yet it has not faced the same public pressure from the Republican U.S. president.

Carney was elected prime minister in April on the argument that Canadians should keep their “elbows up.” He has responded by distancing Canada from its intertwined relationship with the U.S., seeking to strengthen its links with the European Union and the United Kingdom.

Hours before Trump’s letter, Carney posted on X a picture of himself with British Prime Minister Keir Starmer, saying, “In the face of global trade challenges, the world is turning to reliable economic partners like Canada.” Implied in his statement was that the U.S. has become unreliable because of Trump’s haphazard tariff regime, which has gone through aggressive threats and reversals.

When Carney went to the White House in May, the public portion of their meeting was cordial. But Trump said there was nothing the Canadian leader could tell him to remove the tariffs, saying, “Just the way it is.”

Daniel Beland, a political science professor at McGill University in Montreal, said Trump’s latest move will make it more difficult for Canada and the U.S. to reach a trade deal, Beland said.

“It doesn’t mean a new trade deal between Canada and the United States is impossible, but it shows how hard it is for the Canadian government to negotiate with a U.S. president who regularly utters threats and doesn’t appear to be a reliable and truthful interlocutor,” he said.

Trump has sent a series of tariff letters to 23 countries. Those form letters became increasingly personal with Canada as well as a Wednesday note that put a 50% tariff on Brazil for the ongoing trial of its former President Jair Bolsonaro for trying to stay in office after his 2022 election loss. Trump was similarly indicted for his efforts to overturn his 2020 election loss to Democrat Joe Biden.

Trump administration officials have said that Trump was seeking to isolate its geopolitical rival China with the tariffs, but the latest tariffs have undermined that message. Brazil’s largest trading partner is China, not the U.S., and Chinese government officials have framed his import taxes as a form of bullying.

“Sovereign equality and non-interference in internal affairs are important principles of the U.N. Charter and basic norms governing international relations,” said Mao Ning, the Chinese Foreign Ministry spokesman. “Tariffs should not be used as a tool for coercion, bullying and interference in the internal affairs of other countries.”

The letters reflect the inability of Trump to finalize the dozens of trade frameworks that he claimed would be easy to negotiate. Shortly after unveiling his April 2 “Liberation Day” tariffs, a financial market selloff caused Trump to announce a 90-day negotiating period during which a 10% baseline tariff would be charged on most imported goods.

But Trump has indicated that the 10% tariff rates are largely disappearing as he resets the rates with his letters.

“We’re just going to say all of the remaining countries are going to pay, whether it’s 20% or 15%,” Trump said in a phone interview with NBC News.

Trump has announced trade frameworks with the U.K. and Vietnam, as well as a separate deal with China to enable continued trade talks. Trump jacked up import taxes on Chinese goods to as much as 145%, but after talks he has said China faces total tariffs of 55%.

In June, Trump said he was suspending trade talks with Canada over its plans to continue its digital services tax, which would hit U.S. technology companies. A few days later, talks resumed when Carney rescinded the tax.

Under the current tariff structure, the 2020 United States Mexico Canada Agreement has protected eligible goods from Trump’s tariffs. But a review of the pact is scheduled for 2026.

Source: AP

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Adam

Commodity

Oil swung as traders await US President Donald Trump’s announcement on Russia and weigh surging supplies from Saudi Arabia.

Brent (BZ=F) traded above $68 a barrel, fluctuating between gains and losses following a drop of more than 2% on Thursday. Trump said he plans to make a “major statement” on Russia on Monday, reiterating criticism of President Vladimir Putin. He also threatened a higher tariff on some Canadian goods and to double the baseline universal levy.

Meanwhile, Saudi Arabia raised crude output far above its OPEC+ quota last month, joining other producers in a rush to export oil out of the Persian Gulf, according to the International Energy Agency. So far, summer demand is supporting prices.

“Tougher sanctions on Russia, particularly oil-related, have the potential to alter the outlook dramatically,” said Warren Patterson, the head of commodities strategy for ING Groep NV in Singapore. “The oil market remains relatively tight through the Northern Hemisphere summer, which should continue to offer some support to prices in the near term.”

Brent futures are on track for a weekly gain, despite Trump’s tariffs and OPEC+ agreeing on a larger than expected production increase for August. World oil consumption will grow by just 700,000 barrels a day in 2025, the slowest pace in 16 years excluding the 2020 pandemic slump, according to the IEA.

The 35% Canada levy mentioned by Trump currently doesn’t apply to goods that are traded within the rules of the US-Mexico-Canada Agreement — and the exclusion is poised to remain in place. The US is also expected to keep a lower 10% tariff on some energy-related imports.

Separately, OPEC+ has been discussing a pause in further production increases from October.

“Despite a market-wide expectation of an oil glut at the back end of this year, the current spate of drivers is lacking anything that might send prices back to the lows seen in April and May,” according to a report from brokerage PVM.

source :Bloomberg

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Glendon

Forex

Economic

EU Waits on Trump Letter As Markets Digest Latest Tariff Salvo_1

The European Union braced on Friday to receive a letter from U.S. President Donald Trump, outlining planned duties on his largest trade and investment partner after a broadening of his tariff war in recent days.

The EU initially hoped to strike a comprehensive trade agreement, including zero-for-zero tariffs on industrial goods, but months of difficult talks have led to the realisation it will probably have to settle for an interim agreement and hope something better can still be negotiated.

The 27-country bloc is under conflicting pressures as powerhouse Germany urged a quick deal to safeguard its industry, while other EU members such as France have said EU negotiators should not cave into a one-sided deal on U.S. terms.

After keeping much of the world guessing on his intentions, Trump has outlined new tariffs for a number of countries, including allies Japan and South Korea, along with a 50% tariff on copper, and a hike to 35% on Canada.

"We would need a crystal ball to detect what the U.S. intentions are," an EU diplomat said on condition of anonymity.

Another source with knowledge of the U.S.-EU negotiations said an agreement was close, but that it was hard to predict if the EU might still get a letter announcing more tariffs or when any agreement might be finalised.

One European industry lobbyist said it was nearly impossible to anticipate Trump’s thinking. “It’s policy by Truth Social,” the lobbyist said, referring to Trump's social media platform.

European shares dipped on Friday as investors awaited word on tariffs for the EU.

"The EU has been negotiating with the U.S. about the sector tariffs and also about the reciprocal tariffs...everybody was expecting that there would be a better trade deal coming, but now it looks like it will be a worse outcome," said Jochen Stanzl, chief market analyst at CMC Markets.

Stanzl added a rally on Germany's DAX reflected hopes of a better trade deal with the United States, but that the tariffs on Canada, despite weeks of talks, had cast some doubt on whether it could be achieved.

Elsewhere U.S. Secretary of State Marco Rubio met with Chinese Foreign Minister Wang Yi in Kuala Lumpur on Friday, as the two powers vied to push their agendas in Asia as tension simmers over Trump's tariffs.

Rubio said the meeting was "very constructive," while adding the two sides had issues to resolve.

China this week warned the United States against reinstating hefty levies on its goods next month and Beijing has also threatened to retaliate against nations that strike deals with the United States to cut China out of supply chains.

Source: Yahoo Finance

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Adam

Economic

Market optimism was dampened in the Asian session as market participants digested the latest Trump tariff updates which included a 35% tariff on Canada. President Trump also announced a potential blanket tariff of 20% on other countries.

Asian Market Wrap

Asia Pacific stocks traded mixed in the Asian session as the positive mood from the US session faded after President Trump's announcements.

The ASX failed to sustain its early session momentum as gains in mining, materials and resources were offset by in real estate and tech. In Japan the Nikkei saw choppy price action as ongoing trade uncertainty continues and weighs on the Japanese yen as well.

Chinese markets are on the front foot despite the lack of obvious bullish catalysts, although US Secretary of State Rubio and Chinese Foreign Minister Wang Yi are set to meet in Malaysia today.

UK GDP Contracts for Second Month

The UK economy shrank by 0.1% in May 2025, following a 0.3% drop in April, missing expectations of 0.1% growth.

GDP fell 0.1% in May, missing expectations of a 0.1% rise, following a 0.3% drop in April due to reduced exports to the U.S. from higher tariffs. This points to a likely GDP decline for Q2, making an August rate cut seem unavoidable.

Markets Today: 35% Tariff on Canada, Bitcoin Surges, UK GDP Contracts Again, DAX Retreats Toward 24000_1

European Open

European stocks fell on Friday as the US president expanded his trade war. The STOXX 600 index dropped 0.4% to 550.96 points by 0708 GMT but was still set for a weekly gain. Other major markets in the region also declined.

On Thursday, Donald Trump said the EU might receive a letter about tariff rates by Friday, raising doubts about trade talks between the US and the EU. Recently, Trump has added new tariffs on several countries, including a 50% tariff on copper.

Among sectors, personal and household goods fell 1%, healthcare dropped 0.7%, but defense stocks rose 0.6%.

In company news, BP said its second-quarter results might be hit by lower gas and oil prices, though its production is expected to be higher. BP shares rose 1.3%.

On the FX front, The U.S. dollar rose on Friday amid global trade tensions. The Canadian dollar fell 0.27% to 1.3693 after Trump announced a 35% tariff on imports from Canada starting August 1.

The euro dropped 0.2% to 1.1682, down 0.9% for the week. The Australian dollar slipped 0.11% to 0.6581, while sterling fell 0.16% to 1.3558, losing over 0.6% this week.

The New Zealand dollar declined 0.34% to 0.6015, and the yen weakened 0.44% to 146.91 per dollar, down 1.6% for the week after Trump imposed a 25% tariff on Japan.

Currency Power Balance

Bitcoin hit a record high of 117,685.96, boosted by institutional investor demand. Ethereum (ETH) surged over 6%, reaching a five-month high of 3,017.81.

Looking at commodities and Oil prices fell yesterday, testing a key support level.

Gold prices are on the offensive this morning breaking above a descending trendline with further upside looking likely. The uncertainty around trade deals keeps the precious metal supported for now. Next key area of resistance around the 3360 mark.

Economic Data Releases and Final Thoughts

Looking at the economic calendar, another quiet day today with US initial jobless claims is the only release which may have some impact on markets. We do also have a host of central bank policymakers speaking today from both the Fed and Bank of England.

Beyond that further developments on the trade deal front will likely drive market moves and sentiment for the rest of the day.

Chart of the Day - DAX Index

From a technical standpoint, the DAX index has retreated to retest the range breakout from earlier this week.

Bulls remain in control as long as the DAX holds above the 23745 swing low. There is a key level of confluence provided by the 20 and 50-day MAs which rest around the 23800.

A daily candle close below the 23745 handle could open up the potential for further downside.

DAX Daily Chart, July 11. 2025

Source: marketpulse

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Economic

Britain's economy contracted unexpectedly for a second month running in May, official data showed on Friday, compounding worries at home for finance minister Rachel Reeves as the nation navigates growing global turbulence.

Gross domestic product shrank by 0.1% after a 0.3% drop in April, the Office for National Statistics said.

Economists polled by Reuters had mostly forecast that gross domestic product would rise by 0.1% from April's level. And while the services sector eked out a sliver of growth, declines in industrial output and construction dragged down overall output.

Following a growth surge early in the year, Britain's economy could now be facing flat or weaker growth than previously expected for the April-to-June period, economists said.

Friday's data now adds to expectations the Bank of England will cut interest rates next month.

"The lack of momentum in the UK economy indicated by these sluggish figures means that an August interest rate cut currently looks inevitable, despite the recent spike in inflation," said Suren Thiru, economics director at accountancy body ICAEW.

Prime Minister Keir Starmer's Labour government has struggled to improve growth meaningfully in its first year, with a tax hike on employers and U.S. President Donald Trump's trade wars weighing on the economy.

Britain's goods exports to the United States - its single-largest export destination - surged earlier this year as U.S. importers rushed to beat the imposition of Trump's tariffs.

But they fell sharply in April. And trade data published on Friday showed only a slight recovery to around 4.4 billion pounds ($6.0 billion) in May, bringing export levels back down to where they were roughly three years ago.

UK economy shrinks again in May, raising new worries over outlook_1

The chart shows how Prime Minister Keir Starmer's Labour government has struggled to "kickstart" economic growth on a consistent basis.

Economists say it looks increasingly likely Reeves will need to raise taxes again in her next budget - something she had hoped to avoid.

"While today's figures are disappointing, I am determined to kickstart economic growth," Reeves said of Friday's data.

Britain's economy expanded rapidly in the first quarter of 2025, outstripping growth in other countries in the Group of Seven advanced economies. In May the Bank of England revised up its full-year growth forecast to 1%.

However, much of the growth in early 2025 was likely linked to the expiry of a tax break for some home purchases in April, which boosted the sector before the deadline, as well as a rush by manufacturers to beat higher U.S. import tariffs.

The BoE has said it thinks the economy grew by about 0.25% in the second quarter of 2025.

After Friday's May figures, June's monthly data will need to show at least a flat reading, assuming no revisions to earlier months, in order to achieve any growth for the quarter, the ONS said.

A month-on-month contraction of 0.4% or worse for June would herald a quarterly contraction.

"The second straight decline in monthly real GDP in May will increase concerns that the government's growth plan has been derailed by external and domestic shocks," said Raj Badiani, economics director, Europe, at S&P Global Market Intelligence.

Yael Selfin, chief economist at KPMG UK, said she expected the economy to have remained flat in the second quarter, but spending by households might now be picking up now.

"With wage growth remaining ahead of inflation and borrowing costs set to ease further, a modest pick-up in consumer spending could be on the cards in the second half of the year," she said.

($1 = 0.7386 pounds)

Source: reuters

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Michelle

Economic

Forex

Canada's unemployment rate surprisingly dropped a tick to 6.9% in June as employment increased in wholesale and retail trade and health care and social assistance, data showed on Friday.

The economy added 83,100 new jobs in June, the first net increase since January, Statistics Canada said. Most of this employment growth was in part-time work.

Analysts polled by Reuters had estimated the unemployment rate to tick up to 7.1% from 7% in May, with no job additions. The jobs report usually has a standard error of around 32,000 between two consecutive months.

This is the final jobs report before the Bank of Canada's monetary policy decision on July 30 and a better than expected unemployment and job addition numbers is likely to tilt the bank towards another hold in its policy rate.

The June inflation data coming next week will be the final number which will help the central bank seal its decision.

Money markets are betting that the odds of a rate cut this month are at just 30%, a slight change from Thursday after U.S. President Donald Trump threatened to impose 35% tariffs on all Canadian imports from Aug. 1, which will be over and above the already existing tariffs on various sectors. (0#CADIRPR)

While the number of unemployed Canadians in June hardly changed from May, it was up 9% to 128,000 on a year-over-year basis and over one in five unemployed people had been searching for work for 27 weeks or more in June, an sharp increase from June 2024.

Statistics Canada said the layoff rate in June did not show any major uptick and remained low at 0.5% relative to historical averages barring recessionary periods.

Tariff exposed sectors such as transportation and manufacturing had been showing signs of strain for the three months through May.

The employment in transportation dropped by 3,400 people in June while manufacturing posted a jump of 10,500, StatsCan said.

The biggest increase in employment was a 33,600 jump seen in wholesale and retail trade. Healthcare and social assistance saw a jump of 16,700 people while agriculture sector shed 6,000 people in June.

The participation rate, or the number of people employed and unemployed in the total population was at 65.4% in June, up from 65.3% in May.

The average hourly wage of permanent employees - a gauge closely tracked by the BoC to ascertain inflationary trends - grew by 3.2% to C$37.22.