North American Economic Drift: What can the Fed and Bank of Canada do about it?
Market Pulse Webinar
Catch up on our December webinar with Neil Parker, Head of Economics and Market Strategy, as he unpacks the challenges facing North American economies and what they mean for interest rates and FX market volatility. Neil also examines the Fed’s latest moves, assesses Canada’s labor market trends, and explores how these dynamics could shape currency performance heading into 2026.
Key takeaways
North American economies are facing slowing growth, uneven labor market trends, and diverging monetary policies. While rate cuts aim to support activity, the outlook remains uncertain: U.S. households are tightening spending, Canada’s job gains are mixed, and policy decisions across the region could drive volatility in FX markets.
Global growth outlook: disappointment persists
Global economic activity remains weak, with IMF and OECD forecasting slower growth in 2026. Despite monetary easing, Euro Area recovery is muted, and growth in China and Japan is slowing due to tariffs and rising interest costs.
Interest rate shifts: more easing required
The Fed has cut rates again, while Banxico and Brazil’s central bank face pressure to ease further. In contrast, the Bank of Japan is preparing for its first hike since January, highlighting diverging policy paths.
US economy: lower rates, limited relief
Despite rate cuts, the U.S. economy struggles with a weak housing market, cautious consumer spending, and declining job growth—raising doubts about the effectiveness of monetary policy.
Canada: is the labor market improvement real?
Full-time employment has grown modestly in 2025, but recent gains have been offset by declines in October and November. Part-time job growth remains strong as employers hesitate to make permanent hires amid economic uncertainty.
Euro Area: growth stalled despite easing
German and Italian weakness continues to drag Euro Area performance. Even after significant rate cuts, economic momentum remains elusive, underscoring structural challenges.
FX market outlook: dollar weakens post Fed
The dollar has softened following Fed rate cuts, while the euro has strengthened on improved growth expectations. The Canadian dollar has rallied on labor market resilience, and the Mexican peso remains firm despite looming rate cuts.
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