USD/CAD strengthened Despite positive CAD Employment Data
- It was a Bullish Friday, with USD/CAD increasing by 0.14% at 1.3510.
- The Canadian economy added 34.7k jobs in March, which is above experts’ forecasts.
- The expectation of 25 bps hikes at the next fed meeting increased after the strong US job data
Declining Crude Oil Weighed on Loonie and helped USD/CAD Currency Pair
On Thursday, Canada gave its March employment report, and the figures looked positive. Compared to February’s figure of 21,800, the economy added 34,700 jobs, much above the average forecast of 7,500. Additionally, unemployment was unchanged at 5.0%, a decrease from the prediction of 5.1%. However, wage growth slowed, going from 5.4% to 5.2%. This helped USD/CAD currency pair gain more than 0.14% in 24 hours.
Even with the Bank of Canada’s aggressive rate-tightening process, the labor market has remained unexpectedly robust. Since the beginning of the current cycle in March of 2022, the BoC has never stopped rates previously and paused rates in March. According to Governor Macklem, they will use the data to determine future interest rates. As a result, when the BoC meets on April 12, it will decide whether the economy has cooled sufficiently to call for another halt.
Additionally, WTI crude oil continues to trade under pressure at $80 as risk aversion rises. Oil prices fell slightly, but are still on track for a third straight week of gains, strengthened by OPEC+’s surprising decision to cut output levels and a significant decline in US oil storage.
Canada reported an excellent employment report as job growth and unemployment was better than anticipated. However, the decline in oil prices kept the market in bearish sentiment, preventing the commodity-linked Canadian Dollar from rising. It is advantageous for USD/CAD.
US Employment data and Fed rate hikes strengthened the US Dollar
According to US economic data, the services sector developed at a more modest rate in March as demand cooled.
Furthermore, initial claims for unemployment insurance fell by 18,000 from 246,000 in the week ending April 1, exceeding forecasts of 200,000 from experts, adding to worries that the job market is slowing down. However, recent US employment statistics released on Friday revealed that the economy gained more jobs than predicted.
According to a report on Friday, the largest economy in the world added 236,000 jobs in March, a decrease from the upwardly revised 326,000 jobs gained in February and considerably below the 472,000 jobs added in January. Additionally, the jobless rate decreased to 3.5%, just above a multi-decade low.
Although the growth of US jobs slowed in March, the Federal Reserve is still considering raising interest rates as it fights rising inflation. According to the Fedwatch tool from CME Group, expectations for a Fed 25 bps rate increase in May are 65%.
Therefore, the US Dollar Index (DXY) climbed significantly by 0.44% at 102.27 in response to the optimistic US economic data and growth prospects of another rate rise from the Fed. The surging US dollar aided the USD/CAD rise.