USD/CAD continues to trade sideways this week. In the Tuesday session, the pair is trading at 1.2441, up 0.09% on the day. It’s a quiet day on the release front, with no Canadian events. In the US, the sole indicator is the Empire State Manufacturing Index. The indicator is expected to climb to 18.4 points.
All eyes are on the Bank of Canada, which holds its monthly policy meeting on Wednesday. Most experts expect the BoC to raise rates by a quarter-point, from 1.0% – 1.25%. The last time the benchmark rate was above 1.0% was back in December 2008. The Canadian economy has looked strong of late, underscored by unexpectedly strong employment data. At the same time, BoC Governor has some concerns about the economy, particularly looming dark clouds over NAFTA. The free-trade agreement, crucial to the Canadian economy, is in trouble, as US President Trump has threatened to cancel the pact unless Mexico and Canada make major concessions to the US. If the agreement is terminated, the Canadian dollar would likely take a tumble.
The Canadian dollar held recorded strong gains in December, and has held its own against the greenback in January. There are two important factors for this positive trend. First, Canada recorded outstanding employment numbers in the past two months. In December, the economy added 78.6 thousand jobs, defying experts who predicted a minuscule gain of 1.8 thousand. This release comes on the heels of a superb November release, when the economy added 79.5 thousand news jobs. The unemployment rate dropped to 5.7% in December, down from 5.9% a month earlier. Second, the recent rise in oil prices, which are up 6.7% since December 1, has boosted the commodity-based Canadian currency.
