The USD/CAD pair saw a strong rebound near the 1.3500 level as the US Dollar recovered losses following the release of the US Nonfarm Payrolls (NFP) data for August. The weaker-than-expected job growth in the US raised expectations of Federal Reserve (Fed) interest rate cuts this month. On the other hand, Canada’s jobless rate increased further to 6.6%, impacting the Canadian labor market.
The NFP report revealed that the number of workers hired was lower than estimates at 142K, but still higher than the previous release of 89K. The Unemployment Rate in the US fell to 4.2%, as expected, showing signs of a mixed labor market. Average Hourly Earnings accelerated at a faster pace, rising to 3.8% annually, renewing concerns about persistent price pressures. However, this is not likely to affect the Fed’s interest rate decisions as their focus remains on preventing job losses.
The US Dollar Index (DXY) recovered from its intraday losses and climbed to around 101.20, showing strength against major currencies. In Canada, the labor market saw the addition of 22.1K job-seekers, falling short of market expectations of 25K workers. The Unemployment Rate in Canada increased to 6.6%, surpassing estimates and the previous release of 6.4%. Average Hourly Earnings also decelerated to 4.9%, indicating easing wage growth momentum.
The slower labor growth in Canada, along with the rising jobless rate, may lead to expectations of further interest rate cuts by the Bank of Canada (BoC). Despite the fluctuations in the labor market data in both the US and Canada, market participants are closely monitoring the situation to assess the impact on future monetary policy decisions. The diverging labor market conditions in the two countries could have implications on the USD/CAD pair and overall market sentiment in the coming days.
