The Canadian dollar (CAD) made gains against the U.S. dollar (USD) on Friday, ending a three-day decline. This shift came after positive employment figures bolstered investor confidence, counteracting the recent strength of the dollar.
At this point, USD/CAD is trading around 1.3990, down roughly 0.20%, easing from Thursday’s six-month peak near 1.4030, which followed the release of the September Labor Force Survey in Canada.
According to Statistics Canada, payrolls surged by 64,000 in September, which is significantly higher than the expected increase of just 5,000. This also reversed the preceding month’s decline of 65,500 jobs. Meanwhile, the unemployment rate remained steady at 7.1%, which is better than the forecasted rise to 7.2%. Additionally, average hourly wages increased by 3.6% compared to the previous year, keeping pace with the growth seen in August.
While wage growth is modest, the improving conditions in the labor market reduce the urgency for the Bank of Canada (BoC) to implement further rate cuts this month. Traders currently predict a 57% chance of a rate cut in October, a decrease from about 72% prior to the data’s release. Regardless, a rate cut of 25 basis points is still anticipated by the year’s end.
On a different note, West Texas Intermediate (WTI) crude oil prices dropped more than 2% on Friday, dipping below $60.00 and approaching a four-month low. Since Canada is a significant oil exporter, declining oil prices might curtail the loonie’s advance.
The dollar index (DXY) is slightly lower at around 99.35, while the loonie gains some traction as the dollar’s rally comes to a halt. Though the index is hovering near two-month highs, it remains stable after a solid week and is still on track for its largest weekly increase of the year.
