USD/CAD rebounds strongly to near 1.3500 following the release of US and Canadian employment data

• USD/CAD rebounds strongly to near 1.3500 as the US Dollar reverses losses following the release of US NFP data for August.
• Slower-than-expected US job growth raises expectations of Fed interest rate cuts this month.
• Canada’s unemployment rate rises further to 6.6%.

The USD/CAD pair quickly recovers close to the round-level support of 1.3500 in the American session on Friday. The CAD asset turns volatile following the release of US/Canadian employment data for June.

The US Nonfarm Payrolls (NFP) report showed that labor demand turned out to be weaker than expected. The number of workers hired was 142,000, lower than estimates of 16,000 but higher than the previous release of 89,000, revised down from 114,000. The unemployment rate fell to 4.2%, as expected from the previous release of 4.3%.

Meanwhile, average hourly earnings accelerated at a faster-than-expected pace. On an annual basis, wage growth momentum climbs to 3.8% from estimates of 3.7% and the previous release of 3.6%. This has renewed fears that price pressures may remain persistent. However, it is unlikely to influence market speculation on the Federal Reserve’s (Fed) interest rate path as the central bank is more focused on preventing job losses.

The US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, recoups its intraday losses and rises near 101.20.

In Canada, the labour market witnessed the addition of 22.1K job seekers. The job growth was slower than expected as market participants estimated the hiring of 25,000 workers. In July, Canada’s labour market data faced an unexpected reduction as 1.4K employees were laid off. Meanwhile, the unemployment rate rose further to 6.6%, higher than estimates of 6.5% and the previous release of 6.4%.

Average hourly earnings slowed sharply to 4.9% from the previous reading of 5.2%. Rising unemployment rate and slowing wage growth momentum would raise expectations for further interest rate cuts by the Bank of Canada (BoC).