Key Moments
- USD/CAD trades just under 1.3900, sitting near a one-month high as the Canadian Dollar comes under pressure.
- Markets anticipate a -2.5k decline in Canadian employment in December, following three consecutive months of robust job gains.
- Analysts note the Bank of Canada has finished its easing cycle, with swaps indicating 70% odds of a 25 bps hike to 2.50% over the next twelve months.
CAD Under Strain as New Year Begins
The Canadian Dollar is weakening at the start of 2026, with USD/CAD trading close to the 1.3900 level. BBH FX analysts highlight that the pair is nearing a one-month high, reflecting pressure on CAD as market participants position ahead of new economic data.
According to the analysts, “CAD has started the year as one of the worst performing major currencies with USD/CAD near a one month high, just under 1.3900.”
Focus on December Labor Force Survey
Attention is centered on Canada’s December labor force survey, which is scheduled for release today. Consensus expectations point to a modest deterioration in employment conditions, with the economy projected to shed -2.5k jobs.
This anticipated decline follows a sequence of solid employment gains in prior months, which had previously supported the labor market backdrop.
| Month | Change in Employment (k) |
|---|---|
| September | 60.4k |
| October | 66.6k |
| November | 53.6k |
| December (expected) | -2.5k |
Policy Outlook and Market Pricing
BBH FX analysts emphasize that monetary policy expectations are helping to frame CAD’s trading profile. As they note, “The Bank of Canada is done easing, limiting CAD undershoots.” This suggests that, in their view, the central bank is not expected to deliver further rate cuts.
Rate markets are aligned with that assessment, with the swaps curve indicating that investors are assigning 70% odds to a 25 basis point rate increase to 2.50% over the coming twelve months. This pricing reflects expectations that the policy rate path could shift higher, even as near-term data such as the December labor force survey remains under scrutiny.
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