C$ steadies ahead of expected volatility around jobs data

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar steadied against its U.S. counterpart on Thursday as investors awaited U.S. and Canadian jobs data that could guide expectations for the size of expected central bank interest rate cuts.

The loonie was trading nearly unchanged at 1.3510 to the U.S. dollar, or 74.02 U.S. cents, after trading in a range of 1.3504 to 1.3525.

“I think tomorrow’s big NFP (nonfarm payrolls) event is what’s holding it back right now,” said Erik Bregar, director of FX and precious metals at Silver Gold Bull.

The options market shows traders are preparing for potentially big moves in currencies on Friday when U.S. nonfarm payrolls data for August is due to be released.

Softening U.S. labor market data has led some investors to expect that the Federal Reserve will begin its monetary policy easing cycle later this month with an oversized half-percentage-point reduction in interest rates, rather than a quarter-percentage-point move.

Canada’s employment report for August is also due to be released on Friday, with economists expecting an increase of 25,000 jobs.

On Wednesday, the Bank of Canada lowered its key policy rate by 25 basis points to 4.25%, and Governor Tiff Macklem, citing weak economic growth, said a larger cut could be in order if the economy needs a boost.

“Zooming out though, I think the trend is still higher for the Canadian dollar … and I think that will remain the case so long as this week’s lows hold,” Bregar said.

The loonie is set to give back some of its recent gains over the coming months but could make another move higher in 2025 if central bank easing cycles revive the global economy, spurring demand for commodities, a Reuters poll found.

Canadian bond yields eased across the curve, tracking moves in U.S. Treasuries. The 10-year was down 2.6 basis points at 2.969%, its lowest level since Aug. 2.

(Reporting by Fergal Smith; Editing by Paul Simao)