USD/CAD to stabilise around the 1.26/1.28 area for now – ING

Thursday’s oil rally offered some support to the loonie, with USD/CAD now stabilising below 1.2800. Economists at ING expect the pair to hover around the 1.26/1.28 region for now.

Looking at jobs data amid fresh restrictions

“Today, expect any positive surprise in the US payrolls to benefit CAD in the crosses, as good US data normally have positive spillovers to the loonie. Jobs figures for December will also be released in Canada. Consensus expectations are for a moderate increase in hiring, but we flag the risk of a negative reading, which would worsen a domestic economic story that is already facing the strains of tough containment measures.”

“Disappointing employment data today may offer a reason for policymakers to sound more cautious on tightening given the Omicron spread. Still, we must remember that the Canadian economy (and the jobs market in particular) was in a very good place before Omicron hit, and any re-rating of BoC expectations may be premature.”

“The short-term outlook for CAD remains mostly tied to risk-sentiment swings and oil performance, although the worsening domestic picture and a market positioning that is not overstretched to the short-side both suggest the loonie is now facing an unusual domestic drag. We think USD/CAD may stabilise around the 1.26/1.28 area for now.”