USD\/CAD edged higher on Wednesday, trading near 1.3612 after rebounding from intraday lows around 1.3500. The move followed reports that the US is privately considering withdrawing from the US-Mexico-Canada Agreement (USMCA), which put pressure on the Canadian Dollar.<\/p>\n
The reports had not been confirmed by US officials. Uncertainty around North American trade ties also remained elevated.<\/p>\n
US labour market data supported the US Dollar after recent weakness. Nonfarm Payrolls rose by 130K in January versus expectations near 70K and December\u2019s revised 48K, while the Unemployment Rate slipped to 4.3% from 4.4%.<\/p>\n
The Bureau of Labor Statistics said average monthly job growth in 2025 was 15K. Average Hourly Earnings increased 0.4% month-on-month versus a 0.3% forecast, with annual earnings at 3.7% year-on-year versus 3.6%.<\/p>\n
Markets continued to price about two US rate cuts by year-end. Attention turned to Friday\u2019s US Consumer Price Index report.<\/p>\n
Oil prices gave back part of earlier gains after Volodymyr Zelenskyy said Ukraine is ready to meet the US on 17\u201318 February. Softer crude prices can weigh on the Canadian Dollar because Canada is a major oil exporter.<\/p>\n
The conflicting signals from strong January labor data and ongoing USMCA trade uncertainty suggest a period of rising volatility for USD\/CAD. We should consider buying options to position for a larger-than-expected price move in the coming weeks. Implied volatility is likely to be undervalued given the number of near-term risk events.<\/p>\n
The rumors of a potential US withdrawal from the USMCA represent the most significant risk to the Canadian dollar. With over $900 billion in annual two-way trade at stake, any confirmation of this threat would likely send USD\/CAD sharply higher. We should consider buying out-of-the-money USD calls as a cost-effective way to hedge against, or profit from, this tail risk.<\/p>\n
Friday’s US CPI report is the next major catalyst, creating two-sided risk for the US dollar. A hotter-than-expected inflation number would delay Fed rate cut expectations and boost the dollar, while a soft report would do the opposite. This makes long straddle or strangle strategies on USD\/CAD attractive to capture a significant move in either direction post-release.<\/p>\n
While the January jobs report was strong, we must remember the context of the weak hiring momentum we saw throughout 2025, when job growth averaged only 15,000 per month. This discrepancy reinforces the Federal Reserve’s data-dependent stance, meaning market reactions to each new data point will be amplified. Looking back, the VIX index often remained elevated even during periods of positive data in early 2024, showing that underlying anxiety can persist and justify the cost of options protection.<\/p>\n
We must also monitor the oil markets, as crude remains Canada’s single largest export, accounting for over $120 billion in value last year. Geopolitical developments, like the upcoming talks involving Ukraine, can cause sudden swings in WTI prices, creating volatility for the loonie independent of economic data. A breakdown in talks could see oil prices firm and support the CAD, while a resolution could have the opposite effect.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD\/CAD rises near 1.3612 as USMCA exit fears hit CAD; strong US jobs, softer oil support USD.<\/p>\n","protected":false},"author":62,"featured_media":16966,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-41615","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41615","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=41615"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/41615\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16966"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=41615"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=41615"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=41615"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}