USD/CAD extends correction to 1.3700 as Fed Powell sees inflation risks as more balanced

USD/CAD corrects sharply as Fed Powell admits progress in the disinflation process.
Fed Powell sees risks to price pressures as more balanced.
This week, investors will pay close attention to the labor market data for June from the US and Canada.

Sagar Dua FXStreet

The USD/CAD pair extends its correction to near the round-level support of 1.3700 in Tuesday’s New York session. The Loonie asset declines as the US Dollar retreats after Federal Reserve (Fed) Chair Jerome Powell’s commentary at the European Central Bank (ECB) Forum on the Central Banking in Sintra, Portugal.

Fed Powell said that the central bank has made quiet a bit progress in inflation and latest data suggests that the disinflation process has resumed. However, he reiterated that more good inflation data is needed before cutting interest rates. Powell added that risks to inflation are more balanced. He also said that an unexpected weakness in the labor market could force them to react on interest rates.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls back to 105.80.

Going forward, the major trigger for the US Dollar will be the United States (US) Nonfarm Payrolls (NFP) data for June, which will be published on Friday.

Meanwhile, the Canadian Dollar remains under pressure even though higher-than-expected May inflation data have diminished expectations that the Bank of Canada (BoC) will deliver rate cuts sequentially.

This week, the Canadian Dollar will dance to the tunes of the Employment data for June, which will be published on Friday. Economists expect that the Unemployment Rate increased to 6.3% from the prior release of 6.2%. Canadian employers hired 22.5K workers, which was lower than the former reading of 26.7 K.

Economic Indicator

Net Change in Employment

The Net Change in Employment released by Statistics Canada is a measure of the change in the number of people in employment in Canada. Generally speaking, a rise in this indicator has positive implications for consumer spending and indicates economic growth. Therefore, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish.

Why it matters to traders?

Canada’s labor market statistics tend to have a significant impact on the Canadian dollar, with the Employment Change figure carrying most of the weight. There is a significant correlation between the amount of people working and consumption, which impacts inflation and the Bank of Canada’s rate decisions, in turn moving the C$. Actual figures beating consensus tend to be CAD bullish, with currency markets usually reacting steadily and consistently in response to the publication.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

EUR/USD retakes 1.1800 on renewed USD weakness

EUR/USD gains ground after three days of losses, re-attempting 1.1800in the European trading hours on Thursday. The US Dollar sees fresh selling interest across the board, despite hawkish Fed Minutes, as the market mood improves and supports the pair. US Jobless Claims data, Fedspeak and geopolitics remain in focus.

GBP/USD recovers above 1.3500 amid better mood

GBP/USD finds fresh demand and rises back above 1.3500 in the European session on Thursday. Improving risk sentiment and renewed US Dollar weakness are helping the pair recover ground ahead of mid-tier US data releases and Fedspeak.

Gold clings to gains above $5,000 amid safe-haven flows and Fed rate cut bets

Gold sticks to modest intraday gains, above the $5,000 psychological mark, through the first half of the European session, though it lacks bullish conviction amid mixed cues. The third round of US-mediated negotiations between Ukraine and Russia concluded in Geneva on Wednesday without any major breakthrough.

Injective token surges over 13% following the approval of the mainnet upgrade proposal

Injective price rallies over 13% on Thursday after the network confirmed the approval of its IIP-619 proposal. The green light for the mainnet upgrade has boosted traders’ sentiment, as the upgrade aims to scale Injective’s real-time Ethereum Virtual Machine architecture and enhance its capabilities to support next-generation payments. The technical outlook suggests further gains if INJ breaks above key resistance.

Hawkish Fed minutes and a market finding its footing

It was green across the board for US Stock market indexes at the close on Wednesday, with most S&P 500 names ending higher, adding 38 points (0.6%) to 6,881 overall. At the GICS sector level, energy led gains, followed by technology and consumer discretionary, while utilities and real estate posted the largest losses.