USD/CAD holds onto Friday’s losses around 1.3800, investors await Fed-BoC policy

The USD/CAD pair clings to Friday’s losses near 1.3800, driven by strong Canadian employment data.
Investors expect the BoC to hold interest rates steady and the Fed to cut them on Wednesday.
US President Trump refrained from providing a timeframe about when the White House will resume trade talks with Canada.

Sagar Dua FXStreet

The USD/CAD pair trades weakly near its 11-week low around 1.3800 during the Asian trading session on Monday. The Loonie pair fell drastically on Friday after the release of the Canadian labor market report for November, which showed that the Unemployment Rate dropped significantly to 6.5% from 6.9% in October due to a significant increase in part-time workers.

Full-time jobs created by the Canadian economy in November were 53.6K, slightly lower than 66.6K in October, while economists anticipated that employers would have shed 5K jobs.

Strong Canadian employment data has diminished hopes of an interest rate cut by the Bank of Canada (BoC) for the monetary policy scheduled on Wednesday. The BoC is expected to hold interest rates steady at 2.25%.

However, the uncertainty over trade relations between the United States (US) and Canada still remains a major hang for the Canadian Dollar. Following the meeting Canadian Prime Minister Mark Carney and Mexican President Claudia Sheinbaum on Friday, US President Donald Trump stated that talks were "very good, very productive", but didn’t clarify on when Washington will resume trade talks with Canada.

US President Trump said, “We’ll see,” when asked if he would restart trade talks with his northern neighbour, cbc.ca reported.

Meanwhile, the US Dollar (USD) trades with caution ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday. The Fed is widely anticipated to cut interest rates by 25 basis points (bps) to 3.50%-3.75% as labor market conditions continue to deteriorate.

Economic Indicator

BoC Interest Rate Decision

The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.

AUD/USD flirts with 0.7000, lowest since early August amid bullish USD

AUD/USD hits a fresh low since early August during the Asian session on Friday and looks vulnerable near 0.7000 after breaking below the 200-day SMA overnight. Against the backdrop of the hawkish Fed, a two-day rally in oil prices revives inflation fears and continues to push US bond yields to multi-year highs. Adding to this, geopolitical risks lift the US Dollar to a two-month high, overshadowing RBA rate hike bets and weighing on the pair.

USD/JPY pulls back from three-week high after failing near 159.00

USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.

Gold treads water below $4,300

Gold grabs some buying attention and advances marginally at the end of the week, partially retracing the weekly decline, although it is still navigating below the key $4,300 mark per troy ounce. The fresh selling bias on the Greenback and the modest decline in US Treasury yields appear to support the humble advance in the precious metal.

Crypto Today: Bitcoin and Ethereum edge lower, XRP extends recovery as macro headwinds weigh

The broader cryptocurrency market is consolidating on Friday, with Bitcoin paring losses slightly above $84,000. Ethereum declines in tandem with BTC. Ripple (XRP), meanwhile, paints a different picture.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Federal Reserve (Fed) and the Bank of Japan (BoJ) have just done something remarkably similar. Both central banks raised interest rates by 25 basis points (bps) last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.