CAD: Mixed jobs data anchors USD/CAD
The latest employment report from Statistics Canada delivers a decidedly mixed message that highlights a cooling labour market. While the headline Net Change in Employment missed expectations significantly, showing a loss of 24,800 jobs against a survey forecast of a 5,000 gain, underlying details prevented a purely negative read. The losses were concentrated in part-time work (-69,700), while full-time employment actually remained resilient with a gain of 44,900 positions. Furthermore, the Unemployment Rate surprisingly fell to 6.5% (below the surveyed 6.8%), primarily because the Participation Rate dropped sharply to 65.0% from the expected 65.4%, indicating that the lower unemployment figure was driven by workers exiting the labour force rather than robust hiring.
Despite the headline miss on job creation, the release has not injected significant volatility into the USD/CAD, which continues to consolidate within the tight 1.36 to 1.37 range. Markets appear to be reading the “net employment” figure in conjunction with the lower unemployment rate as a wash; the negative shock of the job losses is dampened by the drop in the jobless rate and the fact that the losses were largely part-time. Consequently, the data provided neither the bullish spark needed to drive the CAD higher nor the catastrophic signal required to send the pair breaking aggressively upward through resistance.
Digging deeper, the report reveals structural softness that validates the market’s hesitation to pick a direction. Wage growth cooled to 3.3% year-over-year, missing the 3.7% consensus, and private sector employment shrank by 52,000, signaling weaker business demand. With employment falling in key economic engines like Ontario (-67,000) and manufacturing (-28,000), the data paints a picture of an economy that is rebalancing rather than collapsing. This ambiguity leaves the Bank of Canada with little pressure to drastically alter its course, keeping the USD/CAD anchored in its current consolidation pattern as traders await a clearer catalyst.
GBP: BoE tone undercuts sterling
While a steady Bank of England (BoE) was widely expected (rates unchanged at 3.75%), what we hadn’t anticipated was a stronger dovish tilt, clearly illustrated by the 5–4 vote split, with four dissenters favouring a cut. The shift in tone carried through to the press conference as well. Supported by updated forecasts pointing to inflation falling below target by spring, Governor Bailey sounded more confident in the UK’s disinflationary outlook, noting that “there should be scope for some further reduction in Bank Rate this year.” The dovish stance is reinforced by the broader backdrop of slowing growth and rising unemployment. According to the projections, inflation does not rise above 2% again from April until the start of 2029 and spends four consecutive quarters below target.
The tone marked a clear contrast with the more hesitant, hawkish‑leaning stance of previous meetings. Traders responded by sharply increasing the probability of a March cut from around 20% to roughly 65% – a sizeable shift. That said, with inflation still at 3.4%, the dovish tone remains highly sensitive to incoming data that confirm the softening in price pressures.
Sterling shed ground across the board, with losses compounded earlier in the day by renewed political tensions surrounding Starmer’s leadership. The rates market was instructive, however, in showing how the rate‑outlook narrative dominated sterling’s price action. Long‑end yields had pushed higher before the meeting, triggering a bear‑steepening setup, and the BoE’s dovish hold extended that steepening across maturities.
The shift clearly jeopardises short‑term bullish momentum in sterling, particularly against the euro, where the UK rate outlook is most cleanly expressed given the neutrality of the euro leg. The key data release now is the January inflation report, due 18 February, which will be crucial in gauging whether inflation developments align with the BoE’s projected disinflationary path, shaping sterling’s near‑term direction in turn.
EUR: ECB keeps rates on hold
The European Central Bank (ECB) kept rates unchanged at its first meeting of 2026, as expected, and reiterated that inflation should converge toward its 2% target over the medium term. The Governing Council again described policy as being in a “good place,” noting a resilient euro‑area economy but acknowledging that the outlook remains clouded by global trade uncertainty and geopolitical tensions.
The stronger euro was a key talking point. The ECB’s nominal trade‑weighted euro is sitting at multi‑decade highs and appreciating at a 7–8% y/y pace, but President Lagarde pushed back against the idea that policymakers are alarmed. She stressed that the currency is broadly in line with historical averages and that recent moves were already embedded in the ECB’s baseline — including an assumed EUR/USD rate of $1.16 for this year. With EUR/USD having backed a few handles away from the feared $1.20 mark last week and now trading around $1.18, the urgency for the ECB to lean against euro strength — or reopen a policy debate via rate cuts — has faded.
Outside the ECB, market dynamics matter. Volatile swings in precious metals are spilling into EUR/USD, with sharp silver sell‑offs giving the dollar a lift. The 20‑day correlation between EUR/USD and both gold and silver now sits in the 75th percentile of the past five years — a reminder that metals sentiment is exerting an unusually strong pull on the pair at present.
MXN: Banxico holds, USD/MXN takes a breather
Policymakers unanimously voted to hold the benchmark interest rate at 7% on Thursday, marking a strategic pause after 12 consecutive cuts totaling 425 basis points. This shift was prompted by a revised inflation outlook, with headline figures now expected to peak at 4.0% in the first quarter. While the pause signals caution, forward guidance indicates the easing cycle hasn’t fully concluded, leaving the door open for future cuts should the data allow. This localized caution coincides with a broader resurgence in emerging markets, spurred by a softer U.S. dollar and a renewed appetite for risk.
Throughout early 2026, investors have doubled down on high-yield Latin American currencies to capture a “trifecta” of carry, commodity-linked valuation recovery, and lower risk premiums. Momentum in the region accelerated following “Liberation Day,” as Latin American assets began outpacing global benchmarks during a rare window of regional stability. However, the USD/MXN has taken a breather. After the pair slid toward 17.1, the advance hit a meaningful speed bump over the last few days, pushing the pair back above 17.4. This reversal has been fueled by a firming dollar and rising US yields, thanks to a string of robust macro data from the US and the market’s reaction to the nomination of Kevin Warsh.
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Calendar: February 2 – 6
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.