The impressive figures sent USDCAD to new lows at 1.2354. The unexpectedly strong report made the market convulsively review the BoC rate hike expectations 2018. The market is now pricing around a 70% chance of a hike on Jan. 17, while before the release the odds were roughly 30%.
In this respect, there is a room for the loonie to continue its move, especially on the back of USD’s general weakness. However, the current rally warrants some caution, as traders may be overestimating the BoC’s ambitions. The risks are the uncertainty around NAFTA and the potential impact of tighter domestic mortgage rules. These factors may prevent the from hiking during the next meeting, which will be a disappointment for the CAD.
So far, the pair USDCAD struggles to make a meaningful recovery. The price is stuck around the 1.24 mark. In the short-term it needs to recover above 1.2480 area in order to alleviate immediate pressure and regain the 1.25 hurdle.