- USD/CAD flat lines around 1.3560 in Tuesday’s early European session.
- Canada’s Unemployment Rate dipped to a 16-month low of 6.5%, which is unlikely to encourage the BoC to cut rates further.
- US Retail Sales data is due on Tuesday; delayed US employment report for January will take center stage on Wednesday.
The USD/CAD pair trades on a flat note near 1.3560 during the early European session on Tuesday. Nonetheless, a shift in the Bank of Canada (BoC) monetary policy expectations could provide some support to the Canadian Dollar (CAD) against the Greenback. Traders await the US Retail Sales data later on Tuesday, ahead of the delayed US employment report for January.
Statistics Canada revealed on Friday that Canada unexpectedly lost 24,800 jobs in January, but the losses were all part-time. However, the Unemployment Rate in Canada ticked lower to 6.5%, the lowest since September 2024, better than the expectations of 6.8%.
This report has reduced the downside risk to Canada’s growth and policy outlook, narrowing expectations for aggressive BoC easing. This, in turn, could underpin the Loonie and act as a headwind for the pair. “The loonie is finding support from resilient January labor market data,” said Tony Valente, senior FX dealer at AscendantFX.
Traders will closely monitor the US employment report, which was pushed back slightly due to the recently ended four-day government shutdown. The jobs report, which will be released on Wednesday, is expected to show that Nonfarm Payrolls (NFP) rose 70,000 in January. The unemployment rate is seen as steady at 4.4% during the same period. An above-consensus NFP reading could lift the USD against the CAD in the near term.
