The USD/CAD pair is experiencing downward pressure, struggling to maintain the key support level of 1.3500 in the New York session. This comes as the US Automatic Data Processing (ADP) Employment report shows a weaker-than-expected performance, with only 99K fresh payrolls in the private sector in August, falling short of the estimated 145K.
This unexpected decline in private payrolls has raised concerns about the labor market’s health, leading to speculations that the Federal Reserve (Fed) may implement aggressive interest rate cuts in the coming month. As a result, the US Dollar (USD) has weakened, with the US Dollar Index (DXY) dropping to near 101.00 against major currencies.
Looking ahead, market focus will shift to the US ISM Services PMI data for August, scheduled for release at 14:00 GMT. On the other hand, the Canadian Dollar (CAD) remains under pressure as the Bank of Canada (BoC) is expected to continue its policy of lowering interest rates. The BoC recently cut rates by 25 basis points to 4.25%, signaling a potential downward trend in interest rates until next summer.
Investors will also be closely monitoring the upcoming labor market data for Canada in August, set to be published on Friday. Expectations are for Canadian employers to have added 26.5K new jobs, following a previous decline of 2.8K workers. The Unemployment Rate is also projected to increase from 6.4% to 6.5%.
Analysis and Impact:
The weakening US ADP private payrolls data has put pressure on the USD/CAD pair, leading to a decline in the US Dollar and expectations of further interest rate cuts by the Fed. This shift in market sentiment has implications for investors, as it may impact currency exchange rates and economic growth prospects. Additionally, the BoC’s decision to lower interest rates could influence the Canadian Dollar’s performance and the overall economic outlook for Canada. Therefore, monitoring upcoming economic indicators and central bank policies will be crucial for making informed investment decisions in the current market environment.