Canadian dollar rallies as investor sentiment improves

The Canadian dollar is having a good week, posting gains for a third straight day. In the Friday session, the pair is trading at 1.3445, down 0.31% on the day. Employment data will be in the spotlight on both sides of the border, highlighted by U.S. nonfarm payrolls and wage growth, both of which are expected to improve in the December releases. The Canadian economy is expected to create 6.8 thousand jobs in December, after a banner release in November of 94.1 thousand. Traders should be prepared for some movement from the pair in the North American session.

After a dismal December, the Canadian dollar has started off January surprisingly well. The currency is up 1.3% this week, despite continuing swings in the equity markets. As a minor currency, the Canadian dollar is sensitive to investor risk appetite, and turmoil in the markets has translated into volatility for the currency. There is renewed optimism in the markets, as the U.S and China will hold face-to-face talks next week and tackle the ongoing trade war between them, which has shaken the stock markets for months.

A panel discussion with Fed Chair Jerome Powell in Atlanta could prove to be as market-mover at the end of the trading week. The Fed faced criticism for its overly hawkish rate statement at the December meeting, when the Fed raised rates for the fourth time in 2018. The statement unnerved investors and contributed to sharp losses in the equity markets. Powell may use this opportunity to reassure investors by sending a dovish message. The Fed is currently forecasting two rate hikes next year, but many analysts are concerned that continuing to tighten policy when there are signs of an economic slowdown could be a serious mistake./

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