USD/CAD ended a nine-day losing streak yesterday but weak housing starts and manufacturing sales data today helped to solidify the case for a 50 basis point cut next week.

The Bank of Canada is rightfully worried about the strength of the economy but most of the discourse in the country has been about housing and mortgages. RBC economist Nathan Janzen argues labor market weakness is a greater concern than the mortgage renewals.

• Bank of Canada rate cuts (75 bps so far, with much more priced in) have eased pressure on mortgage renewals
• Many 1-3 year mortgages likely to renew at lower rates; variable rate mortgages already seeing relief
• 4-5 year fixed mortgages still face payment increases
• Total mortgage payment increase in 2025 estimated at just 0.1% of household disposable income

Meanwhile, the bob market is showing concerning signs:

• Job openings down 25% y/y
• Unemployment rate now above pre-pandemic levels

RBC forecasts unemployment to rise from 5% now to 7% by early 2025 and notes that each 1 percentage point rise in unemployment typically lowers household disposable income by 0.5%.