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The BoC left its benchmark overnight rate at 2.25% in January, and the published summary of deliberations underlined how elevated uncertainty has reshaped policy discussions. Members agreed that maintaining "optionality" in setting monetary policy was critical given the unusually turbulent backdrop.

The minutes highlighted that recent geopolitical events — including tensions in Venezuela, Iran and Greenland — along with perceived threats to the independence of the Fede — have amplified global uncertainty. U.S. trade policy, increasingly seen as driven by geopolitical aims, was identified as a key source of unpredictability that could disrupt global supply chains and impact economic activity.

BoC officials also flagged downside risks associated with the upcoming review of the United States-Mexico-Canada Agreement (USMCA), suggesting that unresolved trade negotiations could weigh on Canadian growth.

Against this backdrop, the minutes reinforce the view that the BoC is likely to stay on hold for now, with flexibility to respond as data evolve.

Full BoC minutes here.

Highlights

• Canada and China recently entered a two-pronged strategic partnership. Tariff reductions will add an immediate layer of support to Canadian trade, while foreign investment benefits will unfold more slowly over time.
• The stock of Chinese direct investment in Canada could grow to around $90-100 billion over the next five years. This projection includes a cumulative $15 –25 billion of investment above a scenario in which no agreement was reached.
• Investment momentum is likely to remain strongest in Canada’s oil and gas sector, while EV, agri-food and technology investments will begin to gain traction. Investment in sensitive sectors like critical minerals, AI and telecommunication will remain tightly constrained by the Investment Canada Act.
• Deeper engagement with China has created some friction with the U.S. ahead of USMCA renegotiations, reinforcing limits on how far Canada can expand trade and investment ties.

Canada and China recently established an ‘Economic and Trade Cooperation Roadmap’, signaling a shift in economic strategy toward greater engagement with one another. The headline of the new deal was transparent and aimed at easing trade barriers between the two nations. By March 1st, Canada will reduce the 100% tariff rate on Chinese EVs to a Most-Favoured-Nation (MFN) rate of 6.1% while implementing an annual import quota of 49,000 vehicles (rising to 70k by 2030). In return, China will lower tariffs on Canadian agricultural exports, including canola seed – cut from around 84% to 15% – and will remove or reduce duties on products such as lobsters, peas, crabs, and canola meal.

In the near-term, this could alleviate some pressure on overall Canadian trade, while supporting the country’s efforts to expand its export rotation beyond North American borders. Indeed, Chinese tariffs have significantly impacted Canadian canola product exports – down by over 50% year-to-date (YTD) as of October 2025. Other tariffed products, like seafood, pork, and peas, have also seen YTD export declines ranging from 10% to 30%. The revised tariff structure offers relief for agricultural trade, and it is expected that Canada will recover part, though not all, of the lost exports in 2026. Regarding EVs, current import quotas mean EV imports will represent just 3% of total auto sales, with a slight increase as quota limits rise in coming years. While Teslas continue to dominate EV imports under the quota, several Chinese EV manufacturers are showing interest in entering the Canadian market.

The investment parameters of the new deal are where things become more opaque. The two nations jointly signed a Memorandum of Understanding (MoU) to stimulate bilateral investment, focused in areas including energy (both renewable and non-renewable), clean technology, agriculture and food, and consumer and technology sectors. This MoU does not constitute a binding investment treaty; it merely builds on existing pathways without outlining specific investment quotas or financing guarantees. And unlike the trade-specific components of this deal, the net investment impact could take several years to be fully realized. Should Canada and China be successful in recalibrating their economic interests, we see inbound Chinese capital as a growing piece of Canada’s broader plan to catalyze $500 billion in private investment over the next five years.

China-Canada Investment Landscape

Historically, Canada and China have maintained a significant investment partnership. As of 2024, China (including Mainland China and Hong Kong) ranked as the fifth largest source of foreign direct investment (FDI) into Canada (Chart 1). What’s more, bilateral FDI stocks between Canada and China reached over 100 billion in 2024—the highest level on record and more than double the level recorded a decade ago (Chart 2). Compositionally, Canadian FDI into China accounts for around $40 billion of the cumulative bilateral stock, while Chinese FDI flows account for the remaining $65 billion.

Despite these all-time high investment levels, the pace of bilateral investment growth – particularly of Chinese FDI into Canada – has slowed since 2019. That slowdown reflects a mix of political tensions, increased regulatory scrutiny in Canada, Chinese capital controls and pandemic related disruptions. This partnership comes at an opportune time as it allows both nations to course-correct economic relations during a time where the push to diversify across global markets is intensifying.

Identifying the upside to future investment potential is a key question. We can look to the early-2000s to get a sense for how investment flows react to certain structural, political and strategic shifts. China introduced a “Going Out” policy at the turn of the century, which actively encouraged Chinese firms to invest overseas. Canada was considered a suitable candidate for investment, as Chinese investors at that time primarily sought out countries abundant in natural resources. As a result, the share of inward FDI to Canada from China shot higher from 1.5% in 2004 to over 4% in the years following the policy’s introduction. That share would eventually reach over 5% by 2019 before ultimately finding a steady state of around 4.5% in recent years (Chart 3).

While today’s partnership may not be as transformative as the policy changes from two decades ago, China could steadily claim a larger share of Canada’s incoming investment in the coming years. Assuming total Canadian inward FDI grows at an organic 5 % annually, it’s reasonable that Chinese investment could cumulatively add another $15 billion (over the next five years) beyond what would likely occur without a new partnership (Chart 4). In this base scenario, China’s portion of total Canadian incoming FDI is projected to steadily return to 5.3%, reaching its peak level from 2019. A more optimistic, but not improbable scenario, is one where Chinese FDI growth into Canada significantly outpaces other nations, leading to upwards of $25 billion in excess investment over the next 5 years, equivalent to 6% of total inward Canadian FDI. All told, we see the stock of Chinese FDI in five year’s time being somewhere in the range of $90-100 billion, compared to Canadian total inward FDI of around $1.7 billion.

Where Could the Money Flow?

Canada’s energy sector, particularly oil and gas, forms the backbone of Chinese FDI interests in Canada (Chart 5). Existing linkages suggest that Chinese investments in oil and LNG are likely to remain robust and grow steadily over the next several years. Canada’s role as a supplier of energy to Asia (including China) has been growing with new infrastructure such as the Trans Mountain Expansion (TMX) which has allowed for a scaling up of exports to Chinese markets. Additionally, PetroChina already holds a 15% share in LNG Canada, and the recently fast-tracked LNG Phase 2 project from the Major Projects Office (MPO) offers an appealing new avenue for investment. Other noteworthy opportunities include oilsands, refining, and emerging low-carbon energy technologies.

One of the more dynamic new areas of Chinese corporate interest is the automotive and EV sector. By limiting EV tariffs to the MFN rate, Canada is demonstrating a cautious willingness to open markets to Chinese EV makers, with potential investments in manufacturing, battery, and supply-chain facilities. And we’re seeing that ball begin to roll. Chery Automobile Co., a Chinese automaker, recently reported that they are preparing to enter the Canadian EV market, indicating plans to build a full Canadian sales operation and opening offices. Similarly, Ottawa is encouraging Chinese investment in Canada’s food processing, manufacturing and agricultural research sectors. Canada’s large agricultural sector has long been under-invested in, making foreign capital (including from China) potentially more attractive.

Elsewhere, finance and insurance, professional services, and technical sectors have emerged as growing areas of Chinese investor focus, as China diversifies out of natural resources. On the finance and insurance side, this could include stake acquisitions in financial institutions, asset managers, or fintech, and partnerships in professional services. On the tech side, there’s increasing interest in investment toward higher value, innovation-driven segments like technologies linked to EVs and advanced manufacturing.

New Investment Will Not Come at the Expense of Due Diligence

The Investment Canada Act (ICA) governs all foreign direct investments in Canada and its full rule set will still apply to China regardless of recent agreements. The level of review for potential investments varies. Most investment only require a simple notification with no formal approval needed. Large acquisitions of control (above thresholds) require pre-approval under the “net benefit to Canada” test. Lastly, any investment of any size can be reviewed for national security if concerns arise.

Under the ICA, no country is categorically banned from investment, but China has historically faced heightened scrutiny of specific investments due to national security and competition concerns. For example, in 2022 , Canada adopted a policy effectively restricting investments by state-owned or state-influenced enterprises in sensitive sectors like critical minerals, disproportionally affecting China. These investments are either blocked or only allowed on an exceptional basis. Also in recent years, a disproportionate number of national security screens under the ICA involved Chinese investors. Some major Chinese investments impacted by the ICA in the past include: the blocked $1.5 billion takeover of Aecon in 2018, the forced exit of China Mobile in 2021, the blocked $230 million purchase of TMAC resources, and forced divestitures by three Chinese firms in Canadian lithium companies–among several others.

The ICA won’t be re-written because of this deal, but it may be applied differently in select circumstances. A warmer policy climate will open the door to more Chinese investment approvals in manufacturing, auto supply chains, traditional energy infrastructure. Investment vehicles like joint ventures or strategic alliances may see speedier reviews. The guardrails will be firmly in place in areas like critical minerals, AI, telecommunication, defense and data-intensive platforms, which will likely stay highly restricted.

Other Considerations: USMCA Review

Canada’s new strategic partnership with China has created friction with the U.S. administration ahead of USMCA renegotiations later this year. In a Truth Social post, President Trump threatened punitive tariffs on Canadian goods of 100% if Canada negotiates a free-trade deal (FTA) with China. Prime Minister Carney was quick to point out that this new partnership is not an FTA and Canada has no intention of pursuing a comprehensive free trade deal with China. Moreover, in a hearing before the U.S. Senate Banking Committee last week, Treasury Secretary Bessent stated that the U.S. would not remove tariffs on Canada even if Canada eliminated its own levies on U.S. goods, citing the risk of Canada being a gateway for Chinese EVs entering into the U.S. market. As the USMCA review gains steam, Canada will need to be mindful of potential downside risks to its trade relationship with the U.S. with its goals of deeper engagement with China and other trading partners.

Bottom Line

Canada’s economic and investment cooperation framework with China pushes Canada’s global positioning in the right direction. The deal should provide modest near term trade support, though meaningful investment gains may take some more time. Over the medium-term, China will likely regain more of Canada’s FDI pie, an important shift as the nation seeks to drive substantial capital flows into the country. Oil, LNG and EV related supply chains stand out as the most likely beneficiaries, while areas such as critical minerals, AI and data intensive industries remain tightly constrained. Heightened U.S. sensitivities ahead of USMCA renegotiations reinforce clear limits on how far Canada can deepen investment ties with China.

• USD/JPY is experiencing significant pressure, trading below the 100-day MA near 152.800.
• The Yen's unexpected rally is due to political clarity/responsible fiscal policy post-election and speculative short-covering.
• A brief positive reaction in the US dollar following the jobs report is being tested, with pressure on the Fed to act on high rates.
• Attention turns to initial jobless claims and the US CPI release on Friday.

USD/JPY is experiencing significant downward pressure with prices pushing down to a daily low at 152.800. The pair is now trading below the 100-day MA but is more downside still a possibility?

Reasons for the move

Post-Election Yen strength

The Yen has defied expectations of weakness following Prime Minister Takaichi’s landslide election victory.

• Fiscal Clarity: Instead of the feared "fiscal dove" sell-off, the market responded positively to the political clarity and Takaichi’s "responsible fiscal policy" (noting she would not use debt to fund tax cuts).
• Short Covering: Speculators who were "short" on the Yen (betting against it) are aggressively unwinding their positions, creating a "squeeze" that has pushed the Yen higher against both the USD and EUR.

Performance of the US dollar

The US Dollars recent performance has aided the Yen's rise but a brief bout of US dollar positivity came about after the US jobs report today.

The question now is whether the US dollar can build on this momentum or is it just another short-term knee-jerk reaction? The immediate reaction saw rate cut expectations for the US pushed back to July but with President Donald Trump just yesterday taking aim at high rates once more, there is pressure on incoming Fed Chair Warsh to act.

If the Dollar index extends its recovery, USD/JPY may rise once more and could break back above the 100-day MA.

US Dollar Index (DXY) Daily Chart, February 11, 2026

Source: TradingView

Economic data and potential catalysts ahead

The major data release left for this week will come from the US this week.

Later today we have some Fed speakers on deck before attention turns toward tomorrow's release of initial jobless claims.

The week will come to an end with the US CPI release on Friday which could solidify the recent changes to rate cut expectations.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar.

Technical Analysis - USD/JPY

From a technical standpoint, USD/JPY is currently trading below the 100-day MA.

There is concern that USD bulls may be returning and this could hamper the Yens current rally.

The period-14 RSI though remains below the 50 neutral level which hints at bearish momentum remaining in play.

Short-term traders may be looking for rallies toward 154.00 to sell, targeting a move toward the 152.00–152.10 support zone.

USD/JPY Daily Chart, February 11, 2026

Source: TradingView (click to enlarge)

Support

• 153.40
• 152.21
• 151.53

Resistance

• 154.48 (100-day MA)
• 155.00
• 156.27 (50-day MA)

AUDUSD: ⬆️ Buy

• AUDUSD broke resistance zone
• Likely to rise to resistance level 1.7200

AUDUSD currency pair recently broke the resistance zone between the resistance level 0.7075 (top of wave iii from January) and the two daily up channels from November and April of 2025.

The breakout of this resistance zone accelerated the active impulse waves 3 and (C).

Given the clear daily uptrend, AUDUSD currency pair can be expected to rise to the next resistance level 1.7200 (forecast price for the completion of the active impulse wave 3).

CHFJPY: ⬇️ Sell

• CHFJPY broke 2 daily up channels
• Likely to fall to support level 197.50

CHFJPY currency pair recently reversed down with the daily Japanese candlesticks reversal pattern Evening Star from the resistance area between the key resistance level 204.00, daily up channel from January and the upper daily Bollinger Band.

The downward reversal from the resistance level 204.00 started the sharp downward correction which broke the aforementioned up channel from January and the weekly up channel from last October.

CHFJPY currency pair can be expected to fall to the next support level 197.50 (low of the previous minor correction from January).

USDCAD: ⬆️ Buy

• USDCAD reversed from long-term support level 1.3545
• Likely to rise to resistance level 1.3725

USDCAD currency pair recently reversed from the support area between the strong long-term support level 1.3545 (which has been reversing the price from June) and the lower daily Bollinger Band.

The upward reversal from this support zone continues the active short-term impulse wave 3 of the intermediate impulse wave (1) from last month.

Given the strength of the support level 1.3545 and bullish US dollar sentiment seen today, USDCAD currency pair can be expected to rise to the next resistance level 1.3725.

Markets

US payrolls defied the (near-)boldest of expectations as well as broke the downward spiral that originated from last week’s second-tier labour market data. January job growth came in double the 65k expectations. Narrowed down to the private sector, employment even grew 172k. But growth wasn’t particularly broad-based, with a big skew towards health & social assistance sector (+124k). Professional business services came in second (+34k) while transportation & warehouse, IT and financial activities all shed jobs. In contrast, manufacturing (+5k) printed job increases only for the second time in the last two years (the previous occasion being November 2024). The unemployment rate unexpectedly ticked down to 4.3% from 4.4% even as the participation rate rose to 62.5%. Wages grew slightly faster than expected on a monthly basis (0.4% m/m) but that came after a downward revision to the December print. The January job report edition came with the annual benchmark revision, leading to a significant alternation to the job numbers for the period stretching April 2024 through March 2025. The -862k downward adjustment was broadly in line with the -825k expected though. Including the yearly seasonal adjustments which the BLS recalculates each January, average job growth for 2025 amounted to just +15k instead of +49k prior to the revision. Either way, today’s numbers wrongfooted markets who were increasingly betting on faster and more Fed rate cuts. It resulted in a kneejerk upleg in US yields ranging between 3.5-7 bps in a textbook bear flattening move. The timing for a Fed rate cut is being pushed backward again from June to July. The next key input that might affect expectations will be Friday’s CPI report. European/German rates followed the US intraday movement, be it from a distance. Net daily changes amount to no more than 1 bps at the front end of the curve. The US dollar strengthened but much of the move faded pretty soon. EUR/USD hit a low of 1.1833 before recovering to 1.187 currently. DXY whipsawed only to trade little changed around 96.88. JPY remains in a sweet spot with solid gains this week so far pushing USD/JPY to 153.8. US stock markets take the upside surprise well and open around 0.5% higher.

News & Views

The Mexican peso and the Canadian dollar in early afternoon trading were captured in some kind of an air pocket. The USD/MXN pair jumped from the 17.13 area to trade near 17.21 going into the US payrolls release. USD/CAD made a similar move rising from low 1.35 area to trade near 1.356 before the payrolls. The moves came after press agency Bloomberg reported, referring to people familiar with the matter, that US president Trump in private discussions raised the idea of exiting the North American trade pact (USMCA) is set for a mandatory review before a possible extension on July 1. Bloomberg also referred to contexts in the office of US trade representative Jamieson Greer, indicating that simply rubberstamping the 2019 terms of the agreement was not in the national interest of the US, suggesting that more profound changes are on the table as the negotiations develop. Both USD/CAD and USD/MXN extended gains after stronger than expected US payrolls (cf supra).

The ECB today published its wage tracker, which covers active collective bargaining agreements up to mid-January. The tracker indicates negotiated wage growth with smoothed one-off payments at 3.2% in 2025 and 2.4% in 2026. For 2026 smoothed indicator was 0.1% higher compared to the December 2025 release. For 2026, the indictor points to 2.1% wage growth in the first half of the year and 2.7% growth in H2, mostly mirroring lager one-off payrolls in the previous years (2024). The ECB in the press release signals that it still sees forward-looking information in line with negotiated wage growth that might off at below 3% by the end of 2026. If realized, these kind of wage growth levels might support the case for the ECB to hold the policy rate near a 2% neutral level.

Daily Pivots: (S1) 1.3524; (P) 1.3552; (R1) 1.3582; More...

USD/CAD's break of 1.3575 minor resistance suggests that corrective pattern from 13.480 is extending with another rising leg. Firm break of 55 4H EMA (now at 1.3620) will bring stronger rebound to 1.3723 resistance. But upside should be capped by 55 D EMA (now at 1.3763). On the downside, break of 1.3480 low will resume larger down trend from 1.4791 to 61.8% projection of 1.4791 to 1.3538 from 1.4139 at 1.3365.

In the bigger picture, price actions from 1.4791 are seen as a corrective pattern to the whole up trend from 1.2005 (2021 low). Deeper fall could be seen as the pattern extends, to 61.8% retracement of 1.2005 to 1.4791 at 1.3069. For now, medium term outlook will be neutral at best, until there are signs that the correction has completed, or that a bearish trend reversal is confirmed.

Daily Pivots: (S1) 1.1878; (P) 1.1904; (R1) 1.1920; More….

Intraday bias in EUR/USD is turned neutral with current retreat. On the upside, above 1.1928 will target a retest on 1.2081 high. Decisive break there and sustained trading above 1.2 psychological level will carry larger bullish implications. On the downside, however, sustained trading below 55 D EMA (now at 1.1749) will raise the chance of reversal on rejection by 1.2, and target 1.1576 support for confirmation.

In the bigger picture, as long as 55 W EMA (now at 1.1470) holds, up trend from 0.9534 (2022 low) is still in favor to continue. Decisive break of 1.2 key psychological level will add to the case of long term bullish trend reversal. Next medium term target will be 138.2% projection of 0.9534 to 1.1274 from 1.0176 at 1.2581. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep long term outlook bearish.