• Canada lost over 200K jobs in January, much more than expected and the unemployment rate jumped to 6.5% from 6.0%. 
• USD/CAD lurched higher amid loonie weakness and USD strength post-strong US labour market data. 

The Canadian economy lost 200.1K jobs in January, well below the median economist forecast that the economy would have shed 117.5K jobs on the month, according to the latest release from Statistics Canada released on Friday. The January drop in employment comes after 78.6K jobs were gained in December 2021 (revised up from 5.4K). The headline drop was driven by an 82.7K drop in full-time employment and a 117.4K drop in part-time employment. The unemployment rate, meanwhile, jumped to 6.5% in January from 6.0% in December, larger than the expected rise to 6.2%. 

Market Reaction

The combination of much weaker than expected Canadian labour market numbers combined with much stronger than expected US labour market figures has seen USD/CAD lurch higher. The pair is currently trading in the 1.2760s, up from near-1.2720 in pre-data trade and now up about 0.7% on the day. USD/CAD bulls will now be eyeing a test of last week's highs just shy of the 1.2800 level on bets that the latest labour market figures will have hawkish implications for Fed policy versus dovish implications for BoC policy.