- USD/CAD weakens due to weaker employment data on Wednesday.
- The lower US Treasury yields exert pressure on the US Dollar.
- BoC is expected to go for another rate hike by the end of the year.
USD/CAD retreats from a seven-month high, trading lower around 1.3730 during the Asian trading session on Thursday. The pair receives downward pressure following the extended losses in the US Dollar (USD), which could be attributed to the downbeat US employment data on Wednesday.
In September, the US ISM Services PMI decreased from 54.5 to 53.6, aligning with expectations. The ADP Employment Change for the same month increased by 89,000, falling below the market consensus of 153,000 and marking the lowest level since January 2021.
US Dollar Index (DXY) retreats from an 11-month high, propelled by the pullback in US bond yields. The DXY is currently trading lower around 106.50. Nevertheless, market caution regarding the US Federal Reserve's (Fed) interest rate trajectory may lend support to the USD/CAD pair.
The likelihood of the Fed’s higher interest rates for an extended period propelled US yields to multi-year highs before experiencing a rebound. The 10-year US Treasury yield, which peaked at 4.88% on Wednesday, the highest since 2007, stands at 4.71% by the press time.
Traders will likely pay close attention to the upcoming Jobless Claims and Nonfarm Payrolls on Friday. Favorable figures in these reports could stimulate additional gains for the USD and increase volatility in the bond market.
On Canada’s side, S&P Global Manufacturing PMI data revealed a decline from the previous reading of 48.0 to 47.5 in September.
Bank of Canada Deputy Governor Nicolas Vincent said that Canadian businesses, influenced by the pandemic, have implemented larger and more frequent price changes, passing on elevated costs to consumers, which could advance inflation.
Vincent's remarks supported Canadian bond yields, with market sentiment indicating an ongoing expectation for another rate hike from the Bank of Canada (BoC). The potential for one more rate hike this year could offer crucial support to the Canadian Dollar (CAD), as reflected in a 65% probability in money markets.
However, the Loonie faced downward pressure as Crude oil prices followed the downward traction, a key commodity for Canada as a leading oil exporter to the US. Despite the weaker US Dollar (USD), West Texas Intermediate (WTI) Crude Oil struggled to show positive momentum, with the spot trading around $83.50 per barrel at the moment.
Looking ahead, market participants will monitor the release of the Canadian Ivey Purchasing Managers Index (PMI) for September, followed by the job reports on Friday.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD retreats to 1.0700 area following post-PCE jump
After spiking to a daily high of 1.0720 with the immediate reaction to US PCE inflation data, EUR/USD lost its traction and declined to the 1.0700 area. Investors remain cautious ahead of this weekend's French election and make it difficult for the Euro to gather strength.
GBP/USD stays below 1.2650 after US inflation data
GBP/USD struggles to preserve its bullish momentum and trades below 1.2650 in the American session on Friday. Earlier in the day, the data from the US showed that the annual core PCE inflation declined to 2.6% in May, limiting the USD's upside and helping the pair hold its ground.
Gold keeps its daily gains near $2,330 following US PCE data
Gold prices maintain their constructive bias around $2,330 after US inflation readings gauged by the PCE matched consensus in May and US yields advance slightly across the curve.
BTC struggles around the $62,000 level
Bitcoin price faces pullback resistance at the lower band of the descending wedge around $62,000. Ethereum price finds support at $3,288, the 61.8% Fibonacci retracement level. Ripple price faces resistance at $0.500, its daily resistance level.
French Elections Preview: Euro to suffer after the calm, as specter of extremists, uncertainty rise Premium
The first round of French parliamentary elections is set to trigger high uncertainty. Soothing messages from the far right and far left leave the Euro vulnerable to falls. Calm may return only after the second round of voting on July 7.