The Canadian Dollar (CAD) experienced a mixed performance on Friday, climbing against most major currencies but backsliding against the US Dollar (USD). This drop came after a strong US Nonfarm Payrolls (NFP) report boosted the USD and dashed hopes for a rate cut from the Federal Reserve (Fed). Canada added more jobs than expected in May, but the figures were still below previous levels, limiting the CAD’s upward momentum. Hourly wages also increased in both Canada and the US, while the US Unemployment Rate rose slightly, providing a cautious note to an otherwise positive day for the markets.
The Nonfarm Payrolls release provides insight into the number of new jobs created in the US in non-agricultural sectors. A higher reading is seen as bullish for the USD, while a lower reading is considered bearish. The market’s reaction to this data depends on how it assesses all the information contained in the report. The recent NFP report showed a significant increase in job additions in the US, which pushed the USD higher and weakened the CAD.
US NFP added 272K new jobs in May, exceeding the forecast of 185K but revising the previous month’s figures down. The US Unemployment Rate also rose to 4.0%, and US Average Hourly Earnings increased by 0.4% in May, beating expectations. Canada’s Net Change in Employment rose to 26.7K, surpassing the forecast but still below the previous month. These strong job additions in both countries contributed to a decline in rate cut expectations from the Fed, with traders now pricing in a lower probability of a rate cut in September.
The Canadian Dollar was the weakest against the US Dollar on Friday. While it lost ground against the USD, it made gains against other major currencies. The technical analysis of the CAD against the USD showed some gains, but the overall trend seemed to favor the USD in the medium-term. The factors that impact the CAD include interest rates set by the Bank of Canada, Oil prices, the country’s economic health, inflation, and the Trade Balance. The health of the US economy, as Canada’s largest trading partner, also plays a significant role in influencing the CAD.
The Bank of Canada plays a crucial role in determining the level of interest rates, which in turn affects the value of the CAD. The price of Oil, being Canada’s main export, has an immediate impact on the CAD. Higher Oil prices typically lead to an increase in CAD value. Inflation can also influence the CAD positively if it leads to higher interest rates. Macroeconomic data releases such as GDP, employment numbers, and consumer sentiment surveys can affect the CAD’s direction. A strong economy generally leads to a stronger CAD, while weak economic data can cause the currency to depreciate.
In conclusion, the Canadian Dollar faced mixed performance on Friday, with gains against some major currencies but losses against the US Dollar. Strong job additions and rising wages in Canada and the US limited hopes for a rate cut from the Fed, impacting the CAD’s performance. Factors such as interest rates, Oil prices, economic health, inflation, and macroeconomic data releases all play a role in influencing the value of the Canadian Dollar. Investors will be closely monitoring these factors to gauge the future performance of the CAD in the coming days.
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