The Canadian Dollar had yet another very good week, finishing way at the top of the performance table after further gains in energy prices and a second consecutive labour market report which was considerably stronger than consensus expectations. Having briefly dropped below USD/CAD1.2500 on Thursday, the pair tumbled to 1.2372 on Friday; the lowest since September 27th. Both Brent crude oil and US benchmark West Texas Intermediate rallied last week as the political unrest in Iran (the third largest OPEC producer which pumps around 3.8m barrels per day) came into focus. Brent crude reached $68.10 on Thursday whilst WTI rose to $62.07, a level not seen since June 2015. Meantime, the cold weather intensified across North America. Winter Storm Grayson hit the East Coast of the United States with heavy snow, intense winds, and record-setting low temperatures. The cold front has sent temperatures below freezing in more than 92% of the Continental United States. As we write this weekend update, a quick look at the weather right now shows the temperature in Toronto is MINUS 21 degrees centigrade. One month ago, it was the November employment numbers which first lit a fire under the CAD with a 79,500 monthly increase in jobs. In December, the jobless rate fell to 5.7%, the lowest in the current data series that begins in 1976. The number of jobs rose by 78,600, smashing expectations and bringing the full-year employment gain to 422,500, the best annual increase since 2002. Since September, the Canadian
economy has added 193,400 jobs; the biggest 3-month gain in over 40 years. The yield on 2-year Canada bonds jumped 6bp to 1.77% on Friday, close to a seven-year high whilst the market-derived probability of a rate hike at the Bank of Canada’s next meeting on January 17th surged to 70%, from 40% in the week. It was a very happy New Year for the Loonie.