Commerzbank Sees Canadian Dollar Struggling in Next Months on Hiring Freeze

09:10 AM EST, 02/09/2026 (MT Newswires) -- Although the key United States labor market report (NFP) wasn't published on Friday, there was at least labor market data (LFS) from Canada, which was rather disappointing, said Commerzbank.

Roughly 20,000 jobs were lost in Canada in January, while a small increase in employment had been expected, noted the bank.

At first glance, the significant fall in the unemployment rate at the same time looked positive. However, this was only possible due to a decline in the participation rate and a significant decrease in the labor supply. Neither of these is necessarily a good sign for the labor market, stated Commerzbank.

The figures must now be viewed in the overall context, pointed out the bank. Canadian labor market figures have been exceptionally volatile in recent months. In the fall, for example, markets saw several months of very strong job growth.

Similar to the U.S., there has also been slower growth in the working-age population after several years of strong growth. This naturally reduces nominal job creation.

Nevertheless, the job losses highlight the problems associated with the current difficult relationship with the U.S., added Commerzbank. Last month, this conflict gained momentum again when the U.S. president threatened new tariffs.

This has probably reduced companies' willingness to hire new employees.

As a consequence, the bank continues to assume that, without a deal with the U.S., the recovery of the Canadian real economy is likely to be slow and that the Canadian dollar (CAD or loonie) will continue to struggle in the coming months.

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