CAD: Mixed jobs data anchors USD\/CAD <\/p>\n
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.<\/p>\n
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 \u201cnet employment\u201d 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.<\/p>\n
Digging deeper, the report reveals structural softness that validates the market\u2019s 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.<\/p>\n
GBP: BoE tone undercuts sterling <\/p>\n
While a steady Bank of England (BoE) was widely expected (rates unchanged at 3.75%), what we hadn\u2019t anticipated was a stronger dovish tilt, clearly illustrated by the 5\u20134 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\u2019s disinflationary outlook, noting that \u201cthere should be scope for some further reduction in Bank Rate this year.\u201d 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.<\/p>\n
The tone marked a clear contrast with the more hesitant, hawkish\u2011leaning stance of previous meetings. Traders responded by sharply increasing the probability of a March cut from around 20% to roughly 65% \u2013 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.<\/p>\n
Sterling shed ground across the board, with losses compounded earlier in the day by renewed political tensions surrounding Starmer\u2019s leadership. The rates market was instructive, however, in showing how the rate\u2011outlook narrative dominated sterling\u2019s price action. Long\u2011end yields had pushed higher before the meeting, triggering a bear\u2011steepening setup, and the BoE\u2019s dovish hold extended that steepening across maturities.<\/p>\n
The shift clearly jeopardises short\u2011term 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\u2019s projected disinflationary path, shaping sterling\u2019s near\u2011term direction in turn.<\/p>\n
EUR: ECB keeps rates on hold <\/p>\n
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 \u201cgood place,\u201d noting a resilient euro\u2011area economy but acknowledging that the outlook remains clouded by global trade uncertainty and geopolitical tensions.<\/p>\n
The stronger euro was a key talking point. The ECB\u2019s nominal trade\u2011weighted euro is sitting at multi\u2011decade highs and appreciating at a 7\u20138% 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\u2019s baseline \u2014 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 \u2014 or reopen a policy debate via rate cuts \u2014 has faded.<\/p>\n
Outside the ECB, market dynamics matter. Volatile swings in precious metals are spilling into EUR\/USD, with sharp silver sell\u2011offs giving the dollar a lift. The 20\u2011day correlation between EUR\/USD and both gold and silver now sits in the 75th percentile of the past five years \u2014 a reminder that metals sentiment is exerting an unusually strong pull on the pair at present.<\/p>\n
MXN: Banxico holds, USD\/MXN takes a breather <\/p>\n
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\u2019t 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. <\/p>\n
Throughout early 2026, investors have doubled down on high-yield Latin American currencies to capture a \u201ctrifecta\u201d of carry, commodity-linked valuation recovery, and lower risk premiums. Momentum in the region accelerated following \u201cLiberation Day,\u201d 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\u2019s reaction to the nomination of Kevin Warsh.<\/p>\n
Market snapshot <\/p>\n
Table: Currency trends, trading ranges & technical indicators<\/p>\n
Key global risk events <\/p>\n
Calendar: February 2 \u2013 6<\/p>\n
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All times are in EST<\/p>\n