USD/CAD Surges Near 1.3600 After Strong US Labor Market Report
The USD/CAD pair has made a significant move towards the key resistance level of 1.3600 during Friday’s New York session. This surge is attributed to several factors, including a stronger-than-expected US Nonfarm Payrolls (NFP) report and higher oil prices that have bolstered the Canadian Dollar.
Key Highlights of the US NFP Report:
- The US economy added 254K jobs in September, surpassing estimates of 140K.
- The Unemployment Rate dropped to 4.1% from the previous month’s 4.2%.
- Annual Average Hourly Earnings increased by 4.0%, exceeding expectations.
- Month-on-month wage growth rose by 0.4%.
This robust job growth data has caused traders to reevaluate their expectations regarding a 50 basis points (bps) rate cut by the Federal Reserve (Fed) in November. The likelihood of such a rate cut has diminished, leading to a surge in the US Dollar Index (DXY) and 10-year US Treasury yields.
Impact of Oil Prices on the Canadian Dollar:
The Canadian Dollar has also shown strength due to a significant increase in oil prices. With tensions rising between Iran and Israel, concerns about tight oil supply have intensified. Canada, being a major oil exporter to the US, benefits from higher oil prices, which in turn strengthens the CAD.
US Dollar FAQs
What is the US Dollar (USD)?
The US Dollar is the official currency of the United States and is widely used around the world. It accounts for a large portion of global foreign exchange turnover and has historically been a key reserve currency.
Factors Influencing the Value of the US Dollar:
Monetary policy, controlled by the Federal Reserve (Fed), plays a crucial role in determining the value of the US Dollar. The Fed adjusts interest rates to achieve price stability and full employment, impacting the USD value accordingly.
Quantitative Easing (QE) and its Effect on the US Dollar:
Quantitative Easing is a policy tool used by the Fed in extreme situations to increase credit flow in the financial system. This measure can lead to a weaker US Dollar as more currency is printed and injected into the economy.
Quantitative Tightening (QT) and its Impact:
Quantitative Tightening is the reverse process where the Fed stops buying bonds and reduces its balance sheet. This action is generally positive for the US Dollar.