Against a backdrop of improving oil prices, which are keeping CAD supported, fresh weakness on the data or oil front puts CAD at risk.
The December trade balance will be watched closely, particularly on the performance of non-energy exports destined for the US. Slower export growth largely contributed to the expected Q4 growth stall but it is expected to gain momentum in the current quarter, underpinning the BoC’s growth outlook. Other more timely data include the RBC manufacturing PMI and the employment report for January.
The jobs data should uphold the BoC’s view that the labour market remains resilient while sustained softness in manufacturing activity (key to exports) would point to a feeble start to the new year.
With lingering uncertainty over oil and economic growth, CAD remains subject to renewed selling.
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