USD/CAD recovers toward 1.33 following the sharp drop on strong Canada employment data

• Employment in Canada rises more than expected in January.
• WTI stays in red ahead of Baker Hughes data.
• US Dollar Index rises above 96.50 in the NA session.

The USD/CAD pair came under heavy selling pressure in the early NA session and dropped to 1.3230 as the loonie gathered strength on the back of impressive January employment data from Canada. However, following the initial market reaction, the pair gradually recovered its losses and was last seen trading at 1.3278, where it was still down 0.17% on a daily basis.

Statistics Canada on Friday reported that the number of employed in Canada rose by 66.8K in January following December’s 9.3K growth and surpassed the market expectation of 8K by a wide margin. Despite that increase, however, the unemployment rate rose to 5.8% amid a higher participation rate. With the underlying details of the report revealing that the upsurge in employment was a seasonal skew and was driven mostly by people aged 15-24, the loonie struggled to preserve its strength.

Commenting on the data, “The combination of robust job growth, firmer wages and a drift higher in the participation rate make for a strong report on all fronts. This should help support the Bank of Canada’s bias towards higher  rates, although the weakness across the energy sector and Alberta provide evidence of the headwinds to the economy in Q1,” argued TD Securities analysts.

Meanwhile, ahead of the weekly Baker Hughes rig count data, the barrel of West Texas Intermediate is trading in the negative territory near $52.50, not allowing the pair to continue to push lower.

On the other hand, the US Dollar Index remains on track to close the 7th straight day in the positive territory, suggesting that the greenback continues to outperform its major rivals toward the end of the week.  

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