- USD / CAD has bounced from previous lows below 1.2750 and back to multi-month highs around 1.2830.
- The bullish move comes amid a broad deterioration in risk appetite.
- But a strong Canadian jobs report is helping the loonie outperform its risk-sensitive G10 peers.
The USD / CAD spiked lower as a result of the simultaneous release of US and Canadian labor market data at 13:30 GMT, with the pair briefly dipping below the 1.2750 level, but has since reversed sharply higher. . The pair is now trading back to multi-month highs at the 1.2830 zone, having almost hit 1.2850, with gains of around 0.2% on the day. The loonie continues to trade within the confines of an uptrend channel, suggesting that the path of least resistance remains to the upside.
Risk appetite deteriorates
The pullback to the upside from early session lows comes amid a broad slowdown in risk appetite since the US open that has seen selling at the pace of equity and oil markets. Neither issue weighs on risk appetite, but traders are citing continued uncertainty regarding Ómicron and aggressive rhetoric from Fed members (this time from FOMC’s James Bullard) in the wake of the US employment report. For reference, the overall NFP number for November was much weaker than expected, but the household survey showed that the unemployment rate fell more than expected to 4.2% and the participation rate rose. Most analysts interpreted the report as in keeping with the theme of an already tight US labor market that continues to improve.
But the CAD holds up well
Decreased risk appetite has caused the most damage to risk-sensitive AUD, NZD, NOK and SEK, which are 0.8% to 1.2% lower in the session. The loonie is comparatively better probably because the Canadian employment report for November was much stronger than expected. The economy added more than 150,000 jobs, nearly 80,000 of which were full-time, for the month, well above expectations of 35,000. Meanwhile, the unemployment rate fell to 6.0% against expectations for a much more modest drop to 6.6% from 6.7% in October. The report will boost expectations that the BoC will become more aggressive in the coming weeks and remain decisively ahead of the Fed in terms of monetary tightening.
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