The USD/CAD pair remains stable near 1.3500 in the early Asian session on Friday as the US Dollar Index (DXY) hovers around the 101.00 support level. Traders are cautious ahead of key events later in the day, including the US and Canadian employment reports.
Recent data shows that private sector payrolls in the US grew by the smallest amount since 2021 in August, with a 4.8% year-over-year increase. Additionally, the US ISM Services PMI came in stronger than expected at 51.5 in August.
Investors are eagerly awaiting the release of the US Nonfarm Payrolls (NFP), Unemployment Rate, and Average Hourly Earnings reports, as they could impact the Federal Reserve’s monetary policy. A weaker US labor market could lead to a slowdown in the Fed’s easing cycle and pressure the Greenback.
On the other hand, speculation that the Bank of Canada (BoC) will cut interest rates further this year may weaken the Loonie and limit the downside for USD/CAD. The BoC recently cut its benchmark rate for the third time and indicated the possibility of more cuts if inflation continues to decline.
Overall, the employment reports from both the US and Canada will be closely watched by investors as they could influence the future direction of both currencies. A stronger economy is generally positive for a currency, while weak economic data could lead to depreciation.
Canadian Dollar FAQs
- Key factors driving the Canadian Dollar (CAD) include interest rates set by the Bank of Canada, Oil prices, the country’s economic health, inflation, and Trade Balance.
- The Bank of Canada plays a crucial role in influencing the CAD through interest rate adjustments and quantitative easing/tightening.
- The price of Oil has a direct impact on the CAD as it is Canada’s largest export.
- Inflation can have a positive effect on the CAD by attracting capital inflows and increasing demand for the currency.
- Macroeconomic data releases, such as GDP, PMIs, employment, and consumer sentiment, can affect the value of the Canadian Dollar.