- USD/CAD attracted some buying and hit a daily high at the start of the North American session.
- Expectations of further Fed tightening boosted the USD and extended its support.
- Mixed employment data from the United States and Canada did little to provide any significant boost to the major.
- A slight rise in crude oil prices supported the loonie and prevented USD/CAD bulls from placing aggressive bets.
USD/CAD quickly reversed a decline from early North American session and jumped to a new daily high, around the 1.2875 region after the monthly US/Canadian jobs report.
The NFP printout showed the US economy added 428,000 new jobs in April compared to the 391,000 expected. However, this was offset by a slight disappointment in the unemployment rate, which remained at 3.6% against an anticipated drop to 3.5%. Additionally, the average hourly wage also beat market expectations and rose 0.3% month-on-month in April.
Mixed US jobs data provided little boost, although expectations that the Fed would need to take more drastic measures to control inflation acted as a tailwind for the dollar. In fact, markets are still pricing in another 200 basis point rate hike for the remainder of 2022, as evidenced by a further rise in US Treasury bond yields.
Apart from that, a generally weaker tone in the stock markets further pushed safe-haven flows into the greenback. This, combined with rather unimpressive Canadian employment data, acted as a tailwind for the USD/CAD pair. Statistics Canada reported that the number of people employed increased by 15.3,000 in April, against 55,000 expected, and the unemployment rate fell slightly to 5.2%.
However, this was offset by a slight rise in crude oil prices, which provided some support for the commodity-linked loonie and limited any further gains for the USD/CAD pair. Therefore, it will be prudent to wait for follow-up buying before traders begin to position themselves for an extension of the recent upside move seen over the past couple of weeks or so.
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