The labor market in Canada saw some positive growth in December with the economy adding 17.5K jobs, nearly matching the consensus forecast of 17.8K.

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However in a negative development the unemployment rate rose to 7.5% from 7.4%, which caught economists and analysts by surprise.

From the Release: Following two months of declines, employment rose slightly in December, up 18,000. The unemployment rate edged up to 7.5% as more people participated in the labour market. Over the past 12 months, employment growth totalled 1.2% (+199,000), with nearly all of the gains in the first half of the year.

The implication here is that the Bank of Canada may be a bit more cautious in outlining any rate hikes as we move through 2012 if the labor market situation shows further deterioration.

The Canadian dollar has benefited from the expectations for interest rates at the BOC during periods of risk appetite against major rivals.

CAD SOftens After Employment Report

The news weakened the Canadian dollar as the USD/CAD rose to test its highs from Thursday session and that EUR/CAD rose to an intraday high near 1.3060 following the report.

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In the case of the USD/CAD the report pushed the pair back above the 200-EMA and extended the gains in the pair from the last two trading sessions.

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In the case of the EUR/CAD, the reaction following the report reversed some of the Canadian dollars gains we had seen previous two sessions though it was so far a very shallow correction as the euro continues to be quite pressured against its key rivals.

The moves were also limited in that we still await the the US nonfarm payroll report which may have a bigger impact on general risk sentiment in the markets.

Nick Nasad is the Chief Market Analyst at FXTimes - provider of Forex News, AnalysisEducationVideosCharts, and other trading resources.