- USD/CAD falls sharply from 1.3700 amid US Dollar weakness.
- Investors look to US inflation for fresh guidance on interest rates.
- Strong Canadian employment data compounds uncertainty over BoC rate cut prospects.
The USD/CAD pair pulls back sharply as it attempts to regain the resistance of the 1.3700 round level in the American session on Monday. The Canadian dollar is pressured by the sharp decline in the US dollar due to strong speculation that the Federal Reserve (Fed) will begin to reduce interest rates starting at the September meeting.
This has also improved investors' risk appetite. The S&P 500 opens positively, showing a cheerful sentiment in the market. The US Dollar Index (DXY), which tracks the greenback against six major currencies, remains weak near the crucial support of 105.00. The 10-year US Treasury yield falls sharply to 4.47%. Investors' growing confidence in the Fed returning to policy normalization is an unfavorable scenario for the US dollar and bond yields.
The US dollar is under pressure as weak April Non-Farm Payrolls (NFP) and higher-than-expected initial jobless claims for the week ending May 3 have dented investor confidence. in the strength of the labor market.
Meanwhile, investors are focused on US inflation data for April, due to be released on Wednesday. Higher-than-expected inflation data would neutralize the impact of lower hiring and lower wage growth in April and force traders to unwind their bets on rate cuts in September. Conversely, weak inflation data would further boost the Fed's rate cut prospects.
On the Canadian Dollar front, strong April employment data has triggered expectations for the Bank of Canada (BoC), which will pivot towards normalizing monetary policy starting with the June meeting. Statistics Canada reported that Canadian 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%.
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.
