USD/CAD rebounds firmly to near 1.3360 due to downbeat Canadian Employment report
- USD/CAD has shown a solid recovery from the crucial support of 1.3320 after weaker-than-anticipated Canada’s job market data.
- Canada’s Net Change in Employment dropped by 17.3K and the Unemployment Rate jumped to 5.2%.
- S&P500 futures have turned positive after recovering their entire losses, portraying a risk-on market mood.
The USD/CAD pair has recovered sharply to near 1.3360 as Statistics Canada has reported poor Employment data (May). The Canadian labor market has posted a decline in payroll figures by 17.3K while the street was anticipating an addition of 23.2K. Last month the Canadian economy added 41.4K jobs. The Unemployment Rate has increased sharply to 5.2% vs. the estimates of 5.1% and the former release of 5.0%.
Apart from that, annual Average Hourly Earnings have softened to 5.1% from the prior release of 5.2%. This would also ease some heat in resilient consumer spending.
Considering the weakness in the Canadian Employment report, the Bank of Canada (BoC) might reconsider its intention of hiking interest rates further.
Investors should note that the BoC surprisingly raised interest rates by 25 basis points (bps) to 4.75% on Wednesday. BoC Governor Tiff Macklem decided to raise interest rates despite the consistent softening of Canada’s inflation. Consumer Price Index (CPI) in Canada was noted at 4.4% in April. BoC Macklem said in the monetary policy statement that inflationary pressures could turn sticky at these levels consumer spending is resilient. Also, remained doors open for further interest rate hikes.
S&P500 futures have turned positive after recovering their entire losses ahead of the New York session, portraying a risk-on market mood. Lowering the chances of one more interest rate hike from the Federal Reserve (Fed) has improved the appeal for risk-perceived assets.
The US Dollar Index (DXY) has retreated after failing to extend its recovery to near 103.60. Although expectations for a neutral interest rate policy stance by the Fed for the June meeting are skyrocketing, the release of the US CPI (May) data will be keenly watched which will release next week.
As per the preliminary report, headline inflation is expected to soften sharply amid declining oil prices while core inflation that excludes the oil and food prices could continue to remain persistent.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
