USD/CAD declines in the aftermath of upbeat Canadian Employment, revised US CPI data

The USD/CAD pair has come under pressure as the Canadian Employment data for January has outperformed expectations in the early New York session of Friday. Statistics Canada has reported a strong labor growth of 37.5K against expectations of 15K and upwardly revised December’s reading of 12.3K.

The Unemployment Rate surprisingly fell to 5.7% while investors anticipated it rising to 5.9% from the former reading of 5.8%. An upbeat labor market data would strengthen the argument by the Bank of Canada (BOC) for holding interest rates at their current level.

On the oil front, oil price aims to extend its rally above $76.5 as Israeli Prime Minister Benjamin Netanyahu rejected the ceasefire proposal due to unacceptable truce terms proposed by Hamas. This is expected to deepen tensions in the Middle East, which could disrupt oil supply. Lower oil supply results in higher prices. It is worth noting that Canada is the leading oil exporter to the United States, and higher oil prices support the Canadian Dollar.

The US Dollar Index (DXY) comes under pressure as the US Bureau of Labor Statistics (BLS) has revised the monthly headline Consumer Price Index (CPI) to 0.2% from 0.3%. The inflation has been revised as the BLS has employed new seasonal adjustment factors. The new process accurately reflects how consumer prices behaved over the year.

Meanwhile, Federal Reserve (Fed) policymakers emphasize keeping key rates restricted until they get convinced that inflation will come down sustainably to the 2% target. Boston Federal Reserve Bank President Susan Collins said risks of inflation stalling have turned towards the upside due to strong economic growth.