- The Canadian Dollar remains steady as investors prepare for upcoming data to be released on Friday.
- On Friday, Canada will present proposals for wage and labor modifications.
- The US Nonfarm Payrolls report continues to be the highlight of the week’s data.
The Canadian Dollar (CAD) remained stable on Thursday as markets brace themselves for the upcoming labor data from both the US and Canada on Friday. Investors continue to favor the possibility of a rate cut from the US Federal Reserve (Fed) in September, although the likelihood of a delay until November is also being considered.
On Friday, Canada will release its most recent wage growth and labor change figures. However, these releases will be overshadowed by the latest data dump of US Nonfarm Payrolls (NFP). It is anticipated that the Canadian Unemployment Rate will increase in May, and there is a projection of a decline in new Canadian hiring. On the US side, markets have adjusted their expectations for net job additions but still anticipate a more decisive outcome.
Canadian PMI Decline, US Jobless Claims Continue to Increase
- Canada’s Ivey Purchasing Managers Index (PMI) dropped to 52.0 in May on a seasonally adjusted basis, marking a significant decline from the previous peak of 63.0 reached over the past two years. The projected market forecasts had anticipated a rise to 65.0.
- The number of people filing for unemployment benefits in the US increased to 229K in the week ending May 31, compared to the revised figure of 221K from the previous week. The print fell short of expectations, failing to meet the projected figure of 220K.
- Labor costs in the US experienced a slight decrease in the first quarter, with a growth rate of 4.0% compared to the anticipated increase of 4.9% from the previous 4.7%.
- Given the decline in labor expenses and overall economic activity, there is growing optimism in the market that the Federal Reserve will implement a rate cut in September. Based on the CME’s FedWatch Tool, rate markets are indicating a high likelihood, around 70%, of a reduction of at least a quarter-point when the Federal Open Market Committee (FOMC) reveals its latest rate decision on September 18.
- The highly anticipated US Nonfarm Payrolls report is set to be released on Friday, drawing significant attention from the market. According to the latest predictions, economists expect a gain of 185,000 new jobs in May, slightly higher than the previous figure of 175,000. The anticipated increase in US Average Hourly Earnings is projected to be 0.3% on a month-over-month basis, surpassing the prior figure of 0.2%.
Canada Dollar Moves Back to the Middle of the Range as Momentum Fades
The Canadian Dollar (CAD) is gradually moving towards the middle on Thursday, trading within a small margin against most of its major currency counterparts. The performance is also varied, with the CAD showing gains against slightly more than half of its counterparts in low-volume trading.
USD/CAD is experiencing chart volatility on Thursday as it tests the 1.3700 level in lackluster trading. The currency pair is currently situated within a demand zone ranging from 1.3630 to 1.3590. However, there needs to be more significant upward momentum, preventing the pair from surpassing the 1.3700 level.
The daily candlesticks are currently hovering near the 50-day Exponential Moving Average (EMA) at 1.3650, showing little movement. The momentum has decreased since USD/CAD dropped from its highest bids in 2024 at 1.3846. However, the long-term technical indicators still support the buyers as the 200-day EMA is increasing towards 1.3560, providing a support level against any downward movements.