• The Unemployment Rate in Canada is expected to tick higher in January.
• A positive surprise could prompt the Bank of Canada to delay rate cut plans.
• Further cooling of the labour market could put the Canadian Dollar under pressure.  

Statistics Canada is scheduled to release the Canadian Labor Force Survey report at 13:30 GMT on Friday. Consensus among market participants expect the labour market report to come in on a mixed tone, somehow reinforcing the latest decision by the Bank of Canada to maintain its interest rates unchanged.

After holding its interest rates at 5.00% for the fourth consecutive meeting in January,  the Bank of Canada suggested at that meeting that it is still premature to start considering reducing the bank’s interest rates as policy makers need more progress in key fundamentals to begin thinking of interest rate cuts. The bank maintained the key interest rate at 5.0% during its September policy meeting.

At the latest event, the BoC kept further tightening on the table in case inflationary pressure regains traction. On Tuesday, Governor Tiff Macklem said  that "the policy interest rate at 5% is the level we believe is necessary to alleviate the remaining pressure from inflation", while he mentioned that the discussion regarding future policy is transitioning from questioning whether monetary policy is restrictive enough to deliberating on how long to uphold the current stance.

It is worth recalling that inflation figures tracked by the Consumer Price Index (CPI) rose at an annual rate of 3.4% in the last month of 2023, bouncing to levels last seen in May of the last year.

According to Statistics Canada, the economy experienced a marginal gain of 0.1K jobs in December, extending the streak of job creation for the sixth consecutive month since the drop in employment was recorded in July (-6.4K).

Still around key indicators, Canadian Gross Domestic Product (GDP) unexpectedly contracted by an annualized rate of 0.3% in the October-November period following a 0.3% expansion in the previous quarter and a 0.6% gain in Q1 2023