By Ketki Saxena
Investing.com – The Canadian Dollar was little changed against its US counterpart today, as the loonie gained some support from an uptick in risk sentiment reflected in equities, but came under pressure from weak economic data.
The Canadian economy added only 100 jobs in December, as per data from Statistics Canada. Analysts had expected a gain of 13,500 jobs.
The unemployment rate meanwhile ticked higher to 5.9% in December from 5.8% in November.
The data kept alive bets of aggressive rate cuts from the Bank of Canada this year, pressuring the loonie.
The US dollar meanwhile retreated against a basket of major currencies, as employment data came in hotter than expected but ISM non manufacturing data weakened, keeping alive bets of Fed rate cuts as early as March.
Markets are now pricing in a roughly 70% chance of a rate cut in March.
With both the Bank of Canada and Fed expected to begin cutting rates in 2024, analysts at Scotiabank (TSX:BNS) note that “Some compression in yield spreads should result in supporting the Canadian dollar."
"We think rate cuts are probably going to come a little bit earlier, maybe a little quicker in the U.S. relative to much of the rest of the world.”
On a technical level for the USD/CAD pair, analysts at Scotiabank note, “Longer-term chart signals are still leaning USD-bullish. The weekly chart shows a bullish “hammer” candle developed through the turn of the year”
“USD buyers should consider taking opportunities of USD dips to the mid/upper-1.32s. I think the USD could regain the 1.34/1.35 area in the next few weeks which would be a solid opportunity for USD sellers to participate again."