USD/CAD dropped after negative US job data
- USD/CAD traded lower as Canadian economy added more jobs than expected.
- The firm BoC policy and declining oil prices weigh on the Canadian Dollar.
- US Unemployment Rate came higher than expected.
USD/CAD Fundamentals and analysis
USD/CAD is trading at 1.3779, down by 0.35% in 24 hours. The pair is under pressure after a recovery in the Canadian jobs data and an increase in the US unemployment rate.
US economic data
Market investors avoided taking significant positions in the early hours of Friday as sentiments remained cautious ahead of the release of the February US employment data.
Today’s report indicated that overall nonfarm payroll employment increased by 311,000 in February while the unemployment rate increased marginally to 3.6 percent, higher than the expected 3.4%. The retail industry, government, health care, leisure, and hospitality had significant job growth. Moreover, jobs in information, transportation, and warehousing fell.
According to another report, average hourly earnings decreased by 0.2% as opposed to the 0.3% market forecast.
The data had a negative impact on the dollar, causing it to lose a significant amount of value. DXY is trading at 104.89, down by 0.39% in 24 hours and weighing on USD/CAD forex pair.
Crude oil is falling
The Federal Reserve Chairman, Jerome Powell, delivered a planned speech to Congress this week that affected everything. According to Powell’s new narrative, which appears to include even higher interest rates for a longer duration, the central bank will approach its policy course differently.
He confirmed his earlier statements that the US Federal Reserve would undoubtedly need to raise interest rates more than expected and for a prolonged time. It is because recent economic figures have been stronger than anticipated, showing persistent inflationary pressures.
Since the Fed sounded increasingly aggressive on the interest rate outlook, oil prices have fallen further amid growing demand concerns. WTI Crude Oil Futures are now trading 0.85% down at $75.08.
It is important to remember that Canada is a major oil supplier to the United States. Therefore, falling oil prices negatively affect the value of the commodity-linked Canadian Dollar.
Strong Canadian Job Economy added pressure on USD/CAD
On the Canadian Dollar front, Bank of Canada Governor Tiff Macklem reaffirmed an unchanged interest rate policy on Wednesday, as predicted. Traders highly anticipated a steady interest rate move by the BoC because Macklem had previously signalled a pause in the policy tightening phase at the monetary policy meeting in January.
The central bank is confident that the country’s present monetary restrictions are sufficient to control Canada’s persistent inflation. Investors are now speculating that the sensitivity of the Canadian economy to increased borrowing rates will result in a historically significant gap between the tightening operations of the BoC and the US Federal Reserve.
Moreover, today’s reports revealed that the economy added 21.8K jobs in February, which was more than projected, and that the unemployment rate was around 5% lower than the expected 5.1%. The data from both reports backed the Canadian currency while being bearish on the USD/CAD.
