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Canadian Highlights

• Surprising forecasters, Canada gained 67k jobs in October and wages accelerated. The healthy jobs print could give a shot in the arm to consumer spending in the fourth quarter.
• Canada’s federal budget was heavy on spending commitments and will leave Canada with larger deficits. Still, given ongoing uncertainty, more will need to be done to stimulate investment.
• The solid jobs report and stimulative budget have all but eliminated the chance of a near-term BoC cut.

U.S. Highlights

• The U.S. government shutdown officially became the longest in history, passing the 35-day record set in 2019 on Wednesday.
• The dearth of official data has us looking to alternative indicators which point to some further cooling in the labor market.
• Other data show that consumer confidence has weakened since January and has fallen to near-record lows this month.

Canada – Fortune Favours the Hold

There was plenty for markets to digest this week, with a jobs report and of, course, the federal government’s massively hyped budget (see our analysis of the latter here).

Surprising consensus forecasts yet again, Canada’s job market delivered a solid performance last month, with 67k jobs gained (Chart 1). This marked the second straight sizeable monthly increase, and, together with September’s gain, erased declines observed in July and August. What’s more, the unemployment rate dipped 0.2 percentage points, average hourly wage growth accelerated, and even U.S.-levered industries like manufacturing and transportation/warehousing saw job growth. Of course, it’s rarely the case that we get a jobs report where all aspects point in one direction. This time, the fly in the ointment was that gains were concentrated in part-time positions. Also, hours worked were down 0.2% month-on-month due to labour disputes, which will weigh on output in October. Still, this was a healthy print, which could help support consumption at a time when the economy needs a boost.

At long last, the federal government delivered its budget this week. Billed as a blueprint that would transform the Canadian economy, we have a few key takeaways. Deficits are here to say (Chart 2). This year’s shortfall is pegged at 2.5% of GDP, an unusually large deficit for Canada. However, Canada still stacks up well in relation to other G-7 countries, and it’s the same story for the country’s debt burden, even with net debt-to-GDP forecast to climb above 43% over the projection horizon. Markets didn’t seem overly worried about Canada’s fiscal deterioration, with bond yields effectively unchanged in the wake of the budget and the Canadian dollar down only a smidge. The decision to split the budget balance into capital and operating balances did little except provide a fiscal anchor (i.e. balancing the operating budget by FY 2028/29).

Deficits reflect heavy spending commitments on personal tax relief, defense, housing, corporate tax incentives and infrastructure. Some savings offsets are penciled in on workforce reductions and operational efficiencies. This is a sea change from the prior government, which focused on income support or “affordability” measures for different sectors and populations. In a speech this week, Bank of Canada Governor Macklem agreed with this sentiment.

Infrastructure spending and tax initiatives do change the calculus for firms considering investments, but given uncertainty, this budget alone likely won’t be enough to get companies off the sidelines, especially as Canada’s regulatory burden is left largely unaddressed. Also, much will depend on the execution and uptake of the policies set out in the fiscal blueprint.

For the Bank of Canada, the stimulative aspects of the federal budget, coupled with a solid jobs report, have dealt a serious blow to the odds of follow up rate cuts. Markets have effectively priced-out a move in December. We would agree and see the central bank leaving its policy rate unchanged through next year.

U.S. – Consumer Sentiment Falls as Shutdown Enters 38th Day

The current shutdown of the U.S. government became the longest in history this week, entering its 36th day on Wednesday. The outlook for resolving the shutdown is as murky as ever. While new compromises are being floated, confidence from lawmakers seems low. Pressure will build as constituents have to tolerate travel delays, cuts in food aid, and other more visible signs of the shutdown the longer it goes on. Just as cloudy is the picture of how the economy has been evolving since August, the last month covered by official statistics for most measures.

The dearth of federal government data has us looking to other indicators to assess the state of the economy. The preliminary November reading for the Michigan Survey of Consumer Sentiment showed consumer confidence sliding for a fourth consecutive month – reaching a three-year low. Most of the pullback was due to a further decline in consumers’ perception of current economic conditions, which fell to the lowest level on record (dating back to early 1980’s). The survey also showed that inflation expectations remained elevated at 4.7%. Moreover, only 37% of surveyed households think that “now is a good time to purchase large household goods” – the lowest level since 2022 when the Fed first started to raise its policy rate. And this negative sentiment appears to be spilling over to the hard data, with vehicle sales falling to a 17-month low of 15.3 million in October.

The ISM monthly surveys of firms in the manufacturing and service sector are usually helpful indicators of the direction of the economy. Across both sectors, employment remains in contractionary territory, but encouragingly, has been declining at a slower rate. Meanwhile, price growth remains elevated, particularly in the services sector (Chart 1), which complicates the interest rate outlook, especially given the firming in inflation expectations in the Michigan Survey.

Outside of the ISM’s, we also received several other alternative private sector readings on the labor market. ADP estimates of private payrolls rose 42k in October – a modest pick-up from September where job growth contracted by 29k – bringing the three-month moving average to a meager 3k per-month. Meanwhile, Challenger job cuts surged to 153k last month – a six-month high. The Chicago Fed’s estimate of the unemployment rate ticked a touch higher to 4.4% for October. But encouragingly, state-level jobless claims remain low and relatively stable (Chart 2). Federal Reserve Governor Lisa Cook noted this week that hiring is slowing according to job posting data.

While this slew of indicators is mixed, with some showing more weakness than others, the overall message is that the job market is probably hanging in a state of semi-stasis, what we have been calling “low hire, low fire”. As we turn the page on this week, the big question still in our heads is how long we will be looking at the economy through this clouded, half-closed lens – and for that, we will need to see if there is any hope of the government shutdown resolving soon.

Summary

United States: Labor Market Continues to Tread Water

• The longest government shutdown on record continues to drag on. Private sector data show hiring remains weak, but layoffs remain contained. That said, the pressure to trim headcount appears to be broadening, as cost pressures continue to mount and tariff uncertainty persists.
• Next week: NFIB Small Business Optimism Index (Tue.)

International: Global Policy Pause: A Week of Holds with One Exception

• This week, several central banks across both G10 and emerging markets convened to assess monetary policy, with most opting to keep interest rates unchanged. The Bank of England, Riksbank, Norges Bank, Reserve Bank of Australia and Brazil’s Central Bank all held their respective policy rates steady. The only exception was Banxico, which delivered a rate cut, albeit with a hawkish tilt.
• Next week: U.K. GDP (Thu.), China Industrial Production and Retail Sales (Fri.)

Topic of the Week: Supreme Court Hears Tariff Case

• Wednesday’s oral arguments provided the first indication of how the U.S. Supreme Court will strike down President Trump’s tariffs under the International Emergency Economic Powers Act (IEEPA). No matter what the Court decides, the high-tariff environment is set to remain.

Full report here. 

We are looking for cautious optimism in Canada’s manufacturing and wholesale reports for September in the coming week.

Manufacturing has borne the brunt of the negative fallout from U.S. tariffs since spring. Production contracted an annualized 9% in Q2. That was the largest one quarter decline outside of the 2020 pandemic since the 2008/09 recession.

But, the sector has shown signs of stabilizing. Average production over July and August is little changed from Q2, and the advance estimate of manufacturing sales in September jumped 2.8%. Part of that increase likely reflects higher prices. Canadian industrial output prices rose1.3%, seasonally adjusted, by our count in September led by higher petroleum prices. That still leaves volume up 1 ½ % from August.

Most Canadian exports have remained duty free under exemptions for CUSMA compliant trade. Details in manufacturing sales next Friday will be closely watched to gauge the impact of U.S. tariffs on targeted subsectors. Early evidence is starting to suggest that tariff impact on these sectors may have been smaller than feared with U.S. buyers appearing to struggle to find alternative cheaper sources.

Unfilled Canadian manufacturing orders were still up 4.6% from a year ago, and 2.7% since March as of August. Exports of steel products have fallen sharply, but aluminum production and prices are both up from a year ago (1.8% in August and 15% in September, respectively). Employment in the aluminum sector (from SEPH data) was up 8% since March as of August.

Concerns remain about the outlook for motor vehicles, but the number of vehicles produced in Canada in September was slightly above year ago levels.

Jobs in manufacturing and wholesale are up

The advance estimate of September wholesale sales (ex-petroleum) from Statistics Canada was little changed after declining 1.2% in August, but rising 1.7% in July. That would leave sales up an annualized 5% in Q3. Seasonally adjusted, September saw the largest monthly increase in both manufacturing and wholesale employment since January.

Overall, stabilizing industry data are in line with steadying trade flows in Q3. It suggests CUSMA exemptions are still working effectively to backstop the bulk of Canada-U.S. trade even as the details after July can’t be directly reported from U.S. Census Bureau’s trade data that’s critically delayed by the ongoing U.S. government shutdown.

U.S. data including October’s consumer price index and retail sales will not be released on schedule in the coming week. Not only is reading the U.S. economy becoming increasingly foggy, the shutdown— now at a record—is having a larger direct economic impact, especially if crucial SNAP benefits are curtailed.

Monday, Nov 10, 2025

Tuesday, Nov 11, 2025

Wednesday, Nov 12, 2025

Thursday, Nov 13, 2025

Friday, Nov 14, 2025

While the US government is still in shutdown, we are not getting much official data. This puts more focus on private releases and this week we got mixed data for the US labour market. The ADP employment number for October surprised to the upside with a gain of 42k following a drop of 29k in September. However, the Challenger data on announced job cuts showed a sharp rise in layoffs to the highest level since the pandemic. A concerning signal for future employment data.

The US government shutdown, the longest in history, might be nearing its end. Some Republicans are reportedly warming up to the idea of extending the ACA/Obamacare health insurance subsidies that Democrats are demanding. The most likely path seems to be that Congress first passes a short-term 'CR' funding bill until the end of the year, and the finalizes the full-year funding with the ACA extensions included.

US Supreme Court started hearings on the legality of Trump's tariffs on Wednesday, which revealed scepticism among even some of the conservative judges. With a 6-3 split between conservative vs. liberal judges in the court only two conservatives need to vote against the lawfulness of the tariffs. If the court rules against Trump the administration is likely to invoke Section 122 of Trade Act of 1974, which explicitly allows president to set up 15% universal tariffs for 150 days almost immediately. This would buy time for crafting a longer-term plan. We will likely get a ruling during the next month.

In the euro zone service PMI for October was revised higher to a strong reading of 53.0, the highest level in more than a year. It follows data last week showing rising German business expectations and higher euro consumer confidence. With fiscal easing on the horizon, it underpins our view of decent growth outlook and the ECB staying on hold.

China PMIs for October disappointed with a decline in both the official as well as private versions. However, it was driven by a sharp decline in export orders, which was likely related to Trump's threat of 100% tariffs in October, and we look for a rebound in November after the trade deal instead led to a 10% tariff reduction on China.

Bond yields were on a rollercoaster this week initially rising on decent ADP employment but falling again when the rise in job cuts was released Thursday. Stocks were on the backfoot as bubble concerns crept into markets and the high job cuts spurred concerns over the economy. The USD ended the week broadly flat mirroring the shifts in US bond yields.

Next week is still rather light on market movers due to the US government shutdown.  In the euro zone we get the Euro Sentix survey and German ZEW, which sometimes give a good lead on PMIs. US NFIB Small Business Optimism also has some labour market components that has extra focus right now. China releases the monthly batch of data for retail sales, industrial production, home sales and house prices.

Full report in pdf. 

Amid the absence of key US labor data during the longest US government shutdown in history (which has undoubtedly started to weigh on market sentiment, look at stocks this week!), the northern neighbor Canada was still able to deliver a surprise to traders.

The Canadian labor market delivered a second consecutive beat in employment growth, reporting an actual gain of 66.6K jobs (exp -2.5K).

This unexpected surge provides a much-needed lift.: while Canada has been struggling with tariffs biting into some of its key sectors, notably metals and lumber, this comeback in employment marks some slow but tangible regaining of confidence from businesses after what was a rough summer.

However, a closer look reveals that most of these jobs added have been part-time positions.

While this headline beat provided an immediate and strong boost to the Canadian Dollar (CAD), the key question remains whether the market can hold today's current strength without a corresponding increase in full-time employment.

The Canadian Dollar takes the lead on the FX space – November 7, 2025 – Source: Finviz

This is at least a more positive report which may just be the light at the end of the tunnel for the land of Maple Syrup.

Let's now take a look at multi-timeframe charts for USD/CAD to see where this fundamental surprise could take the pair.

USD/CAD multi-timeframe technical analysis

Daily Chart

USD/CAD Daily Chart, November 7, 2025 – Source: TradingView

Today's candle marks the first red candle in the North American pair in 7 sessions.

Some slowing down in buying had brought a double-top RSI divergence which is now seeing some consequences.

The Canadian Dollar has been bleeding for a while with the latest turmoil in US-Canada trade talks – For now, price action remains above the Daily pivot region (1.40 to 1.4050).

4H Chart and levels

USD/CAD 4H Chart, November 7, 2025 – Source: TradingView

Levels to place on your USD/CAD charts:

Resistance Levels

• April 2025 Pivotal Resistance 1.41 - 1.4150
• Nov 5 weekly and multi-month highs 1.4140
• Key resistance 1.4250

Support Levels

• 1.40 to 1.4050 Key Pivot (4H MA 50)
• Major Daily Pivot 1.39 (+/- 200 pips)
• 1.38 Major support +/- 150 pips
• 1.3550 Main 2025 Support

1H Chart

USD/CAD 1H Chart, November 7, 2025 – Source: TradingView

Looking even closer, the divergence happened on all timeframes which magnified this morning's 600 pip move in the pair.

Oversold RSI on the short timeframe prompts small mean-reversion, but as markets head into the weekly close, check if buyers manage to close the week above 1.41.

Failing to do so adds more probabilities of a short-term reversal within the upward channel (upper bound recently tested)

While the market awaits more developments on trade deals, the main aspects to watch for USD/CAD are:

• Is confidence coming back for Canadian businesses? Look at upcoming Canadian PMI data and retails sales; Stronger data there could support CAD strength
• Is the US Dollar still on its run higher or has it found a local top?
• The usual rate differential: A more hawkish Fed boosted the US Dollar. Look out for Federal Reserve speeches

Safe Trades!

Markets

Fragile risk sentiment is still name of the game with main European and US equity markets losing up and over 1%. We don’t see the classic risk-off correlations with core bonds losings marginally ground as well, while the dollar fails to make ground beyond tested resistance levels. Lack of eco data give the opportunity to dive somewhat deeper into several comments by Fed governors today and yesterday. Vice chair Jefferson endorsed the risk management motive that prompted 25 bps rate cuts in September and October but thinks that it makes sense to proceed slowly as we approach the neutral rate. He blames the recent lack of progress in the disinflation appears on tariffs, but still sees underlying inflation progressing to 2%. Chicago Fed Goolsbee (voter) is uneasy with the current shortage of economic numbers. Especially as there aren’t as many private-sector data sources for inflation as there are for the labor market. It makes him feel uneasy as it would take a fair amount of time before any potential problems on the inflation side pop up. He therefore leans more to be “a little careful and slow down when it’s foggy”. St. Louis Fed Musalem (voter) believes that monetary policy is now somewhere between modestly restrictive and neutral. In terms of financial conditions, it’s even getting close to neutral. He wants the Fed to be very careful to continue to lean against above-target inflation. While he acknowledges downside risks to the labor market, he’s happy with the insurance against that risks that the Fed already provided with back-to-back rate cuts. Both Goolsbee and Musalem seems to be preparing to line up with Kansas City Fed Schmid in voting for an unchanged policy rate in December. Schmid already did so in October. Cleveland Fed Hammack (non-voter) is on the same (hawkish) line, labelling inflation a bigger concern than the labor market right now. She argues for a mildly restrictive monetary policy stance to ensure that inflation returns to 2% in timely fashion, adding that the current stance is barely restrictive. Finally, NY Fed Williams elaborated on the ending of quantitative tightening. Recent sustained repo market pressures and other growing sings of reserves moving from abundant to ample justify the decision to end QT starting December 1st. He added that the Fed may soon switch from keeping its balance sheet steady (implying a further mechanical shrinking of reserves) to begin reserve management bond buying. That would obviously be a technical measure and not a signal of a monetary shift.

News & Views

Canadia labour market data for October for the second consecutive month surprised sharply to the upside. The economy added 66.6k jobs, after a rise of 60.4 k in September. The market expected a slight monthly decline. The rise in employment was entirely due to part-time employment (+85.1k). Full time employment declined 18.5k, but coming after a sharp 106.1 k rise in the previous month. The participation rate rose 65.3% from 65.2%. The unemployment rate eased from 7.1% tot 6.9%. Average hourly wages increased 3.5%Y/Y from 3.3% in September. End last month, the Bank of Canada (BoC) cut its policy rate by 25 bps (to 2.25%) as it expected the economy to remain weak in H2 due to the fall-out from the trade tensions with the US. Even so, the BoC then already indicated that “if inflation and economic activity evolve broadly in line with the October projection, the Governing Council sees the current policy rate at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment”. Today’s data only reinforce that view. The 2-y Canada Bond yield rises 5.5 bps to 2.44%. The Canadian dollar strengthens from USD/CAD 1.411 to 1.4065.

Dovish Polish NBP member Kotecki expects the recent benign inflation path to continue toward the 2.5% inflation target. Inflation might already come close to that level in November. The current 145 bps inflation-adjusted, real, policy rate still provides room some further easing towards a potential endpoint for the cycle in the 3.75%-4% range, maybe closer to 3.75% in H1 of next year. A terminal rate of 3.5% only would be possible if inflation fell permanently below target amid slowing growth. That’s not a scenario emerging from current forecasts. The NBP today released its November inflation report. The central path for inflation stands at 3.7%, 2.9% and 2.5% for the 2025-2027 period. GDP growth at 3.4%, 3.7% and 2.6%. Kotecki also indicated that a rate cut in December is rather unusual, but can’t be complete ruled out. The zloty continues trading in a tight range near EUR/PLN 4.25.

U.S. consumer confidence weakened sharply in November as the University of Michigan Consumer Sentiment Index fell to 50.3, down from 53.6 and below expectations of 53.2. Both key subcomponents declined: the Current Economic Conditions Index plunged to 52.3 from 58.6. Expectations Index slipped to 49.0 from 50.3, reflecting broad concern about the economic outlook.

The survey noted that sentiment deteriorated amid growing anxiety over the federal government shutdown, which has now stretched beyond a month.

Inflation expectations also ticked higher, with the one-year outlook rising to 4.7% from 4.6% in October.

Full US UoM sentiment release here.

Daily Pivots: (S1) 152.55; (P) 153.35; (R1) 153.86; More...

USD/JPY is still bounded in consolidations below 154.47 and intraday bias stays neutral. Further rally is expected as long as 151.52 support holds. Above 154.47 will resume larger rise from 139.87 to 100% projection of 146.58 to 153.26 from 149.37 at 156.05. Break there will pave the way to 158.85 key structural resistance.

In the bigger picture, current development suggests that corrective pattern from 161.94 (2024 high) has completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94 high. On the downside, break of 145.47 support will dampen this bullish view and extend the corrective pattern with another falling leg.

Daily Pivots: (S1) 0.8045; (P) 0.8076; (R1) 0.8092; More…

Intraday bias in USD/CHF remains on neutral for the moment. On the upside, firm break of 0.8123 will extend the corrective rally from 0.7828 to 138.2% projection of 0.7828 to 0.8075 from 0.7872 at 0.8213. On the downside, sustained break of 55 D EMA (now at 0.8007) will argue that the corrective bounce has completed and bring retest of 0.7828 low.

In the bigger picture, long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382. In any case, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low).