USD/CAD extends downside below 1.3600 on downbeat US ADP employment data

USD/CAD extends the decline to around 1.3585 in Thursday’s early Asian session.
US June ADP private payrolls fell for the first time in two years.
The US Nonfarm Payrolls report for June will be in the spotlight later on Thursday.

Lallalit Srijandorn FXStreet

The USD/CAD pair trades in negative territory near 1.3585 during the early Asian session on Thursday. The US Dollar (USD) remains under selling pressure amid mounting US debt concerns, tariff policies uncertainty and rising interest rate cut bets. The US June Nonfarm Payrolls report will take center stage later on Thursday.

Investors are concerned about US President Donald Trump's massive tax-and-spending bill, which could add 3.3 trillion in additional national debt. Rising fiscal worries have dampened optimism and weighed on the USD against the Canadian Dollar (CAD).

Additionally, the US private payrolls fell in June for the first time in over two years, signaling possible headwinds in the upcoming jobs report and contributing to the Greenback’s downside. Data released by the Automatic Data Processing, Inc. (ADP) on Wednesday showed that private-sector payrolls decreased 33,000 in June after a downwardly revised 29,000 gain in May. This figure came in below the market consensus of 95,000.

All eyes will be on the US employment data for June on Thursday. Economists expect data on Thursday to show the US NFP increasing by 110,000 in June. Also, the Unemployment Rate, ISM Services Purchasing Managers Index (PMI), and weekly Initial Jobless Claims will be released.

Nonetheless, a decline in Crude Oil prices could undermine the commodity-linked Loonie and help limit the pair’s losses. It’s worth noting that Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD value.

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

How do the decisions of the Bank of Canada impact the Canadian Dollar?

The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

How does the price of Oil impact the Canadian Dollar?

The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

How does inflation data impact the value of the Canadian Dollar?

While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

How does economic data influence the value of the Canadian Dollar?

Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD struggles for direction amid USD gains

EUR/USD is trimming part of its earlier gains, coming under some mild downside pressure near 1.1730 as the US Dollar edges higher. Markets are still digesting the Fed’s latest rate decision, while also looking ahead to more commentary from Fed officials in the sessions ahead.

GBP/USD drops to daily lows near 1.3360

Disappointing UK data weighed on the Sterling towards the end of the week, triggering a pullback in GBP/USD to fresh daily lows near 1.3360. Looking ahead, the next key event across the Channel is the BoE meeting on December 18.

Gold losses momentum, challenges $4,300

Gold now gives away some gains and disputes the key $4,300 zone per troy ounce following earlier multi-week highs. The move is being driven by expectations that the Fed will deliver further rate cuts next year, with the yellow metal climbing despite a firmer Greenback and rising US Treasury yields across the board.

Litecoin Price Forecast: LTC struggles to extend gains, bullish bets at risk

Litecoin (LTC) price steadies above $80 at press time on Friday, following a reversal from the $87 resistance level on Wednesday. Derivatives data suggests a bullish positional buildup while the LTC futures Open Interest declines, flashing a long squeeze risk.

Big week ends with big doubts

The S&P 500 continued to push higher yesterday as the US 2-year yield wavered around the 3.50% mark following a Federal Reserve (Fed) rate cut earlier this week that was ultimately perceived as not that hawkish after all. The cut is especially boosting the non-tech pockets of the market.

Aave Price Forecast: AAVE primed for breakout as bullish signals strengthen

Aave (AAVE) price is trading above $204 at the time of writing on Friday and approaching the upper boundary of its descending parallel channel; a breakout from this structure would favor the bulls.