USD/CAD Exchange Rate: Canadian And U.S. Jobs Report Adds Value To Canadian Dollar
The Canadian dollar garnered a win on last Friday after the announcement of Employment reports for the United States and Canadian markets.
The Canadian dollar rallies on the jobs report
The CAD reacted positively to the released employment data, which indicated an increased employment level. The report revealed that 27,700 jobs were created in May, which was higher than analyst estimates. This was, however, lower than the 106,500 job gains reported in April, but it did influence the CAD's value to go up higher against the USD.
Non-farm payrolls report holds back the greenback
Meanwhile, in the U.S., the report for non-farm payrolls (NFP) was less than stellar, and so the US dollar took a hit. The EURO/USD exchange rate turned bearish on Friday following the release of the job market data. Analysts believe that the disappointing NFP highlights the impact of the extended U.S.-China trade war on the job market.
The US dollar has been quite edgy lately due to the ongoing trade war with China and also the tensions between the U.S. and Mexico. However, things between the two countries kicked off on a positive note this week as the U.S. eased its aggression against Mexico.
In fact, Marcelo Ebrard, the Foreign Minister for Mexico recently revealed on Monday that the two countries reached a border agreement through which the U.S. would ease its tariffs.
Looming rate cuts
Although the two countries reached a border deal, Mexico is still not out of the woods yet as far as the tariffs are concerned. Meanwhile, the CAD’s strong performance is not only influenced by the positive job market data but also Canada’s divergence on monetary policy. While this has worked for Canada, it has been contentious in the U.S. where the Federal Reserve received heavy criticism for hiking interest rates four times in 2018.
This year things look a bit different because the Federal Reserve does not seem to be steering towards an interest rate cut. However, the currently ongoing trade war does not seem to have a major negative impact on the U.S. economy.
Nevertheless, there is still a likelihood that the Federal Reserve will opt to hike interest rates at some point, especially with the US dollar's current performance.
Commodities gain as the USD goes soft
Numerous commodities have been on the rise in terms of value as the dollar trends in the opposite direction. Investors have been flooding in the gold market as a haven to avoid the effects of the existing market uncertainty the US dollar and other currencies.
Oil prices also surged as Saudi Arabia and Russia steer towards an extended OPEC+ deal. The USD also took a hit after the release of May’s employment data. The report indicated that there were 75,000 new jobs created during the month and this is miles off from the estimated 180,000 figure for the new jobs.
There is no doubt that the current market conditions have been making the US dollar less appealing as a haven. And this explains the rising investment in commodities. The unappealing employment data adds more pressure on the Fed, thus increasing its chances of hiked interest rates.