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USD/CAD - Canadian Dollar Edges Lower, U.S. Job Numbers Softer Than Expected

May 04, 2018 11:26 AM ETUUP, FXC, UDN, USDU1 Comment
Dean Popplewell profile picture
Dean Popplewell

By Kenny Fisher

The Canadian dollar has posted slight gains in the Friday session. USD/CAD is trading at 1.2882, up 0.27% on the day. On the release front, Canada releases Ivey PMI, which is expected to improve to 60.2 points. In the US, nonfarm payrolls rebounded with a gain of 164 thousand, although this fell short of the estimate of 190 thousand. Wage growth remained dropped from 0.3% to 0.1%, missing the estimate of 0.2 percent. There was some good news from the unemployment rate, which dropped to 3.9%, beating the estimate of 4.0 percent.

The Canadian economy is performing well, and the markets can expect additional rate hikes this year. That was the hawkish message from Bank of Canada Governor Stephen Poloz earlier this week. Poloz singled out household debt as a significant concern, but said that "since the economy is close to where it belongs, interest rates are headed higher". The markets are confident that the BoC will press the rate trigger in July, with the odds of a hike currently at 73 percent. Other economic issues that Poloz said are weighing on the Canadian economy include uncertainty over US trade policy and the ongoing NAFTA negotiations. If there is progress to report on the US-China tariff spat or on NAFTA, the Canadian dollar should respond with gains.

As expected, the Federal Reserve maintained the benchmark rate at a target of 1.5% to 1.75% on Wednesday. The rate statement was significant, with policymakers noting that "overall inflation has moved closer to 2 percent". This was more hawkish than the March statement, which said that inflation indicators "have continued to run below 2 percent". With inflation moving closer to the Fed target of 2 percent, there is a stronger likelihood that the Fed will upgrade its rate projection from three to four hikes in 2018. The odds of a fourth rate

This article was written by

Dean Popplewell profile picture
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.

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