EUR/CAD Creeps Higher as Canadian Job Market Braces for Bad News

The EUR/CAD pair is inching upward for the third straight day, hovering around 1.6115 during late Asian trading Friday. I'm watching this pair closely as we await what could be some pretty dismal Canadian employment figures due at 12:30 GMT.

The Canadian jobs report is expected to show just 7.5K new hires—a pathetic number compared to historical standards—after shedding 40.8K workers last month. Even worse, unemployment is forecast to hit 7%, which would be the highest since October 2021. Christ, the Canadian economy is really struggling!

If these numbers come in as bad as expected (or worse), traders will almost certainly price in more rate cuts from the Bank of Canada. They've kept rates at 2.75% for three meetings straight, but according to Reuters, markets are betting on a 25 basis point cut to 2.5% in September. I'd say that's practically guaranteed now.

Meanwhile, the Euro remains surprisingly stable despite all the economic challenges in Europe. Most economists believe the ECB will hold rates steady next week—a view I find somewhat questionable given the region's persistent structural issues. Sure, inflation might be "almost under control," but at what cost to growth?

This divergence in monetary policy expectations is what's driving the EUR/CAD pair higher. The ECB's reluctance to cut versus the BoC's likely easing creates a perfect environment for Euro strength against the Loonie.

Looking at the broader picture, I can't help but wonder how long this trend will continue. Oil prices—usually a key driver for CAD—haven't provided much support lately. And with Canada's largest trading partner dealing with its own economic headwinds, the outlook for the Canadian Dollar doesn't look particularly rosy.

My take? Watch today's employment figures closely. If they're worse than expected, we could see EUR/CAD push even higher as markets price in a more aggressive BoC easing cycle. But any surprise strength in the Canadian job market could quickly reverse this trend.