CAD: Surprising solid jobs report
The surprise strength of the jobs report had an immediate and strong impact on the Canadian dollar (CAD), which surged against the U.S. dollar (USD), dropping 40 pips to 1.398. The robust jobs data instantly shifted market expectations regarding the Bank of Canada’s (BoC) policy. The strong figures significantly reduced the market’s expectation for an immediate BoC rate cut, with the probability dropping to just 36%.
According to Statistics Canada, the Labour Force Survey for September 2025 delivered a surprisingly strong report, significantly exceeding market expectations. Specifically, economists had anticipated a modest net change in employment of 5K, but the actual figure was a robust increase of 60K (+0.3%). This job growth helped to partially offset cumulative declines from the previous two months. Furthermore, the unemployment rate held steady at 7.1%, narrowly beating the expected 7.2%
. A key driver of the overall gain was a sharp increase in full-time employment, which rose by
106K, while part-time employment saw a decline. The employment rate also rose slightly to 60.6%
.
The report’s positive momentum was concentrated in specific demographics, with significant employment increases for core-aged workers (25 to 54 years), both men and women, while employment fell among people aged 55 and older. Industry-wise, job gains were notable in manufacturing, health care and social assistance, and agriculture. Regionally, Alberta led the gains, more than offsetting prior provincial declines. However, not all data points were positive; the youth unemployment rate edged up to 14.7% , and the report highlighted a continued challenge for highly educated recent immigrants, who faced increasing rates of overqualification and working in jobs unrelated to their field of study. Average hourly wages grew at a solid
3.3% year-over-year pace.
The Canadian Dollar gained relief from the robust jobs report, but it will likely still face pressure if the US Dollar maintains its upward momentum, as the path of least resistance for the USD remains bullish in the absence of fresh data coming out of the US.
USD: Soft jobs, strong dollar
Section written by: Antonio Ruggiero
The US dollar extended its climb yesterday, with the Dollar Index (DXY) breaching resistance at the 99 level – hitting its strongest levels in two months. This week’s rebound certainly capitalized on JPY and EUR weakness but managed to extend even as peak negative sentiment faded – without the greenback having to confront its own vulnerability: a softening labour market.
Then came fresh research from the Federal Reserve Bank of Dallas, suggesting that slower immigration means the US no longer needs blockbuster job gains to keep unemployment steady. That adds nuance to the recent payrolls slide: still a concern, but perhaps less alarming if part of the weakness reflects structural recalibration rather than just tariff-driven drag.
So the dollar pushed higher – not by confronting its vulnerabilities, but by sidestepping them. What we may be seeing now is a market rethink: risks facing the Fed and the broader economy are tilting more toward inflation than unemployment, prompting a reassessment of the bearish weight that disappointing macro data had placed on the dollar. Layer in the immigration shift, AI-driven labour market transformation, DOGE-fuelled public sector layoffs, and labour data itself may be losing some of its sway in the Fed’s dual mandate. If this narrative sticks, the dollar could be set up for a more sustained rebound into 2026.
MXN: Mixed inflation report
The USD/MXN has seen its impressive year-to-date appreciation, driven by a robust carry trade appeal, transition into a phase of choppy, sideways consolidation, with the pair trading near the 18.30 handle. This recent price action, characterized by low volatility, is a post-event calm following the mid-September turbulence surrounding the U.S. Federal Reserve’s interest rate decision. Fundamentally, the Peso remains underpinned by a massive interest rate differential (Mexico’s high rate vs. the U.S.’s easing cycle) and Mexico’s sound macroeconomic stability. For the short-term outlook, the USD/MXN is expected to continue this range-bound crawl. The structural support near 18.30 is crucial, and as long as it holds, and the market anticipates further U.S. rate cuts, the MXN’s favorable high-carry, high-beta nature will continue to benefit from low global volatility and stable global growth.
On the macro front, Mexico’s headline inflation rose by 0.23% month-on-month, pushing the annual rate from 3.57% in August to 3.76% in September. While this exceeds the midpoint of Banco de México’s 3.0% ± 1 percentage point target, it remains within the official range. The third-quarter average settled around 3.6%. Despite risks from volatile food prices and trade uncertainty with the U.S., the central bank anticipates a gradual decline in inflation, aiming for the 3% target by the second half of 2026. However, long-term inflation expectations, hovering between 3.6% and 3.7%, along with labor costs, may slow this descent, keeping inflation between 3% and 4% over the next year.
Core inflation (INPC Subyacente), a key metric for the central bank, edged up from 4.23% to 4.28% annually, reflecting persistent pressures from core goods and services. Notably, services inflation continued to ease, suggesting that softer domestic demand is helping contain some price growth. In contrast, goods inflation remains the primary driver of the core uptick, though analysts expect this trend to reverse soon due to the peso’s appreciation. Still, with a third-quarter average of 4.2%, core inflation sits at the upper end of the bank’s comfort zone.
EUR: No joy for the euro
Section written by: Antonio Ruggiero
Euro-negative sentiment did less of the heavy lifting yesterday, as other forces took over-extending the euro’s slide against the dollar for a fourth straight day. The setup was there for further downside: EUR/USD had slipped below its 100-day moving average the day before and lingered beneath it in early London trading. That line had remained untouched during the entire euro’s rally, making the breach a tempting trigger for further downside.
Firstly, the ECB minutes released yesterday revealed that officials had considered another rate cut in September – reinforcing their flexible stance and reminding investors that rate expectations on the euro side are more fluid than previously assumed. Ultimately, however, they held back. With inflation hovering near target and a broadly benign economic outlook, policymakers judged it too early to cut further. The main concern was inflation undershooting. The assessment goes: should upside risks to inflation materialize – particularly from geopolitical developments or tariff retaliation – that would validate the decision to hold rates steady. One could argue, however, that inflation driven by supply shocks may be less sustainable than demand-led inflation, potentially warranting another cut sooner rather than later if the economic outlook fails to gain traction.
The now-revealed consideration of a September cut was enough to nudge the still-bruised euro lower against the dollar. Yet it wasn’t euro-specific news, but rather developments on the US side that triggered a breach below support at 1.16, sending EUR/USD to two-month lows. Put simply, we have reason to believe the new research from the Federal Reserve Bank of Dallas “debunking” the severity of the recent non-farm payrolls report played a role. The report carries weight – especially considering that a weakening labour market was perhaps the euro’s last beacon of hope for further upside. Coming from the Fed itself, the report suggests inflation is likely to remain a growing focus, with the labour market perhaps taking the back seat. That’s not good news for the euro, which now appears exposed to bearish forces on both sides of the Atlantic.
Yen, Euro and Pound the biggest losers against the Dollar this week
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Key global risk events
Calendar: October 6-10
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
