During the early Asian session on Friday, the USD/CAD pair traded lower around 1.3605, reflecting a weakening trend in the US Dollar (USD). Market sentiment toward the USD has softened broadly, contributing to the downtick in the pair.
Investor attention is squarely on the upcoming US and Canadian employment reports scheduled for release later in the day. Analysts anticipate that US Nonfarm Payrolls (NFP) data for June will show a slower growth rate, with expectations set around 190,000 new jobs added. The Unemployment Rate in the US is forecasted to remain unchanged at 4.0%, influenced partly by an anticipated decline in the participation rate.
Recent data, including softer US PCE inflation figures and weaker Services PMI, have heightened expectations of a Federal Reserve (Fed) rate cut in September. Market indicators suggest a 70% probability of a rate cut leading up to the NFP release, with a second cut in December priced in at approximately 80%. These prospects have exerted selling pressure on the USD in recent trading sessions.
Turning to the Canadian Dollar (CAD), expectations for the Canadian employment report include a decrease in Net Change in Employment to 22.5K from the previous 26.7K. Concurrently, the Canadian Unemployment Rate is predicted to edge higher to 6.3% from 6.2%. Additionally, the modest decline in crude oil prices has potential implications for the CAD, given Canada’s significant role as a crude oil exporter to the US.
In summary, the USD/CAD pair faces downward pressure amidst broader USD weakness ahead of pivotal economic data releases from both the US and Canada, which are expected to influence market sentiment and trading dynamics moving forward.
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