The USD/CAD pair hit a fresh four-month high near 1.3640 early Friday, fueled by contrasting jobs reports in the US and Canada. The Loonie (CAD) weakened as the US Nonfarm Payrolls (NFP) report signaled a robust labor market while Canadian employment figures disappointed.
Strong US Jobs Data Boosts USD
The US Nonfarm Payrolls report revealed the addition of 303K jobs in March, significantly outperforming the 200K forecast and the revised February figure. The Unemployment Rate fell to 3.8%, beating expectations. This robust demand for labor dampens expectations of a near-term Federal Reserve (Fed) rate cut, boosting the US Dollar (USD).
Minneapolis Fed President Neel Kashkari reinforced this sentiment, stating that rate cuts would not be necessary in 2023 if inflation remains stable. His latest projections anticipate two rate cuts by 2024.
The strong labor market contributes to inflationary pressures through higher wages and consumer spending. The US Dollar Index (DXY) extended its climb to 104.65, reflecting heightened USD appeal.
Weak Canadian Jobs Data Hurts CAD
In stark contrast, Canada’s labor market shed 2.2K jobs in March, significantly below the 25K job growth forecast. The Unemployment Rate surged to 6.1%, exceeding expectations. However, annual Average Hourly Earnings showed a slight uptick to 5.0%.
The disappointing job figures increase speculation that the Bank of Canada (BoC) might pivot towards rate cuts sooner than anticipated.