The Canadian dollar weakened toward 1.39 per US dollar, marking a one-month low as a clear deterioration in labour market conditions weakened the case for tighter Bank of Canada policy and eroded Canada’s rate support. December data showed the unemployment rate rising to 6.8% from 6.5%, well above expectations, not because of layoffs but due to a sharp increase in labour force participation to 65.4%, which brought more jobseekers into the market faster than hiring could absorb them. While employment rose modestly by 8.2K, slowing wage growth at 3.7% y/y from 4% signalled easing domestic inflation pressure, reinforcing the Bank of Canada’s view that policy is already sufficiently restrictive at 2.25%. This combination has reduced confidence in near-term tightening and narrowed expected rate differentials. At the same time, expectations that Venezuelan crude flows could return have widened the WTI-WCS spread, trimming Canada’s energy export outlook and further weighing on the currency.