Canadian dollar loses some of its gains from Friday

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar             1.2600-1.2700

Euro                     1.4300-1.4400

Sterling                1.7125-1.7225

The US Dollar index is marginally stronger this morning but that is only after it took a bit of a hit on Friday morning when the disappointing December Employment report was released. The US economy created just shy of 200K new jobs last month which was far less than expected but the interesting note is that the employment rate is near 3.9% which is a 22-month low and almost considered full-employment. When you look at this factor and take into account an expected increase of 7% in the rate of inflation later this week the market now expects at least 4 interest rate hikes this year from the Federal Reserve with the first being in March, this will help to keep the US Dollar trading stronger in the short-term.

The Canadian Dollar was able to take advantage of the weaker US Dollar on Friday as USD.CAD fell to trade as low as 1.2615 (0.7927). This morning the Loonie has given back some of those gains and opens the week at 1.2640 (0.7911) level. Not a bad result for the Canadian Dollar but given what will be happening this year in the US with interest rate hikes it is hard to see the Loonie experiencing any runaway strength in the short-term.

The Canadian economy created 55K new jobs last month but that number was largely ignored by the market as it will undoubtedly be affected by the recent closures to start the new year.

With nothing of note on the calendar today the market will get setup for Wednesday's US inflation report, it is a quiet week for Canada on the calendar so the Loonie will once again be at the mercy of the US Dollar.