- USD/CAD drops sharply to 1.3630 following strong Canadian employment numbers.
- The Canadian labor market grew by 90,400 new payrolls, while annual wage growth slowed to 4.8%.
- Raphael Bostic, governor of the Atlanta Fed, stated that the central bank is not sure when and by how much interest rates should be reduced.
The USD/CAD pair faces a sharp sell-off at 1.3630 in the early hours of the American session on Friday, as Statistics Canada has released strong data on employment in Canada. The agency showed that employers hired 90,400 job seekers in April, significantly above the consensus of 18,000. In March, the labor market recorded a layoff of 2,200 employees.
The unemployment rate remains stable at 6.1%, while investors estimated that unemployment would rise to 6.2%. However, the average annual hourly wage fell to 4.8% from 5.0% in March. The average hourly wage is a leading indicator of wage growth. Slowing wage growth reduces the pace of consumer spending, signaling weak inflation prospects.
The impact of headline employment data is expected to be minor on the Bank of Canada's (BoC) interest rate outlook, as strong employment growth will offset lower wage growth.
Meanwhile, the appeal of the Canadian dollar remains strong due to the strong recovery in the oil price. West Texas Intermediate (WTI) futures on NYMEX continued its winning streak for the third session on Friday amid strong speculation that the Federal Reserve (Fed) will pivot towards policy normalization starting with the September meeting. It should be noted that Canada is the main exporter of oil to the United States and rising oil prices provide support to the Canadian dollar.
As for the US Dollar, the continued cooling of the US labor market has limited the Dollar's gains. The US Dollar Index, which tracks the greenback against six major currencies, bounces slightly from the crucial support at 105.00. Although investors remain optimistic that the Fed will begin reducing interest rates in September, policymakers remain silent on the matter. In the American session, Atlanta Federal Reserve President Raphael Bostic said the central bank is considering cutting rates this year, but he is unsure when and to what extent quantitative easing will occur.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
