News and Updates

The much-anticipated Canadian January jobs data came in at just over 37,000, more than doubling the 15,000 figure market analysts had expected. This helped the Canadian dollar gain approximately 0.25 of a penny against the US dollar. However, because the vast majority of the gains were in the form of part-time employment, accounting for approximately 48,000 jobs, while full-time employment actually fell by just over 11,000 jobs, the USD/CAD pairing quickly stabilized at a new weekly high (CAD/USD low).

The Canadian dollar remained steady against the US Dollar on Thursday, touching a weekly high as investors await the Canadian employment report expected on Friday morning. Economists are expecting the Canadian economy to have added 15,000 jobs in January. A surprise on the upside with more than 15,000 jobs added could lead the Bank of Canada (BoC) to hold off on any rate cuts. However, if the job numbers come in below expectations and disappoint the market, the Canadian dollar could weaken against the US dollar. This would be seen as a further indication for the BoC that rate cuts are imminent, especially compared to the more stable situation in the US.

While Wednesday ‘s decision to hold the Bank of Canada’s key overnight rate at 5% was widely expected, you could argue that the BoC’s shift in tone and messaging was somewhat of a surprise. The BoC acknowledges that the discussion has now ‘shifted’ from whether more hikes are needed to how long to keep rates elevated. However, this still disappointed markets, and the Canadian dollar weakened on the news, falling to a six-week low against the US dollar. In essence, the markets were of the opinion that the BoC will cause unnecessary damage to the Canadian economy by waiting too long to cut rates. The range of predictions for the first rate cut ranges between April and June of 2024. The BoC’s new inflation forecast sees inflation at 3% for the first half of 2024, before falling to 2.5% by the end of the year and returning to the 2% target in 2025.

The Canadian dollar attempted to muster a rebound against the US dollar overnight but quickly sputtered and gave up its modest gains after Canadian retail sales data for November registered weaker than expected on Friday morning.