The USD/CAD currency pair posted modest gains, hovering around 1.4305 during Thursday’s late American session, bolstered by a mild rebound in US Treasury yields. However, market sentiment remains cautious amid the uncertainty surrounding US President Donald Trump’s trade policies and ahead of the key US and Canadian employment reports due for release.
Trump recently extended a 30-day delay on his plans to impose 25% tariffs on Canadian imports, but the threat of tariffs still looms. Any indications of escalating trade tensions between the US and Canada could place additional downward pressure on the Canadian dollar (CAD).
Thursday also saw disappointing Canadian economic data, contributing to the CAD’s weakness. The Ivey Purchasing Managers Index (PMI) for January revealed a contraction in Canadian economic activity for the first time in five months. Employment growth slowed, and inflationary pressures increased, adding to concerns about the country’s economic outlook.
Investors are closely watching Canada’s upcoming employment figures, with forecasts suggesting a sharp drop in job additions for January—expected to be just 25,000, down from the robust 90,900 jobs added in December. The Canadian unemployment rate is also anticipated to rise to 6.8% from 6.7%.
On the US side, economists predict the US economy added around 170,000 jobs in January, a significant slowdown from the 256,000 increase seen in December. The unemployment rate is expected to remain steady at 4.1%, signaling continued strength in the labor market despite broader economic challenges.
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