The USD/CAD pair is showing signs of aiming to break above the 1.3700 level as the US Dollar gains strength. The upcoming Bank of Canada (BoC) interest rate decision is expected to be dovish, prompting investors to anticipate a rate cut announcement on Wednesday. Factors such as a decline in the core Consumer Price Index (CPI) and weak labor market conditions have fueled speculation that the BoC will take this action. The uncertainty surrounding the BoC’s decision has kept market sentiment risk-averse as investors await the US Nonfarm Payrolls (NFP) data for May, which will be released on Friday.
On the other hand, BoC policymakers have not yet indicated their comfort with the market’s expectations of a rate cut in June, further adding to the uncertainty surrounding the upcoming decision. The US Dollar Index (DXY) has shown a sharp recovery to 104.30, reflecting a risk-off sentiment in the market as indicated by negative overnight futures for the S&P 500. Investors are closely watching the NFP data for May as it will impact market expectations for potential Fed rate cuts, which are currently expected to begin in September.
Prior to the NFP data, the market will be looking at the JOLTS Job Openings data for April, which is expected to show a decrease in job openings from the previous reading. US employers are estimated to have posted 8.34 million job openings, which is lower than the prior reading of 8.49 million. This data will provide insights into the current state of the US labor market and could influence market sentiment leading up to the NFP release on Friday. Overall, the USD/CAD pair is likely to see continued volatility as investors await key economic data releases and central bank decisions in the coming days.
