USD/CAD price rises above 1.4400 as U.S. dollar strengthens ahead of labor data
USD/CAD climbs past 1.4400 as USD rallies
USD/CAD continued its upward streak for a fourth consecutive session, trading near 1.4420 during Friday's Asian hours. The pair gained traction as the US dollar Index (DXY) surged toward a two-year high of 109.56, buoyed by hawkish Federal Reserve minutes and uncertainty surrounding the incoming Trump administration's tariff policies.
Long-term US bond yields further supported the Greenback, with the 10-year yield at 4.69% and the 30-year yield at 4.93%.
Federal Reserve officials emphasized a cautious approach to interest rate reductions. Kansas Fed President Jeffrey Schmid underlined the need for gradual rate cuts, while Michelle Bowman echoed similar sentiments, suggesting a tighter pace than market participants anticipated. These developments strengthened USD demand in global markets.
USD/CAD price movement (Nov 2024 - Jan 2025) Source: TradingView.
Oil Prices Provide Limited Support to CAD
Despite the USD’s dominance, the Canadian dollar (CAD) found partial support from higher crude Oil prices. West Texas Intermediate (WTI) remained steady around $73.70 per barrel, underpinned by increased heating fuel demand and declining US crude stockpiles. Canada, as the largest Oil exporter to the US, benefited from the bullish Oil outlook, which helped mitigate CAD losses against a strengthening USD.
However, trade tensions loomed large. Canadian Prime Minister Justin Trudeau expressed readiness to counter potential tariffs from President-elect Trump, warning of adverse impacts on American consumers and businesses.
Labor Market Data in Focus
Markets are now keenly observing upcoming labor market figures. In the US, Nonfarm Payrolls (NFP) for December are expected to decrease to 160,000, down from 227,000 in November. In Canada, December's Net Change in Employment is anticipated at 25,000, lower than November’s 50,500. These reports will play a pivotal role in shaping the Fed's and Bank of Canada’s policy outlooks.
In our prior analysis, we discussed how Trudeau’s resignation and falling oil prices added volatility to the CAD. Today’s developments reaffirm the influence of global uncertainties and hawkish Fed policies in driving USD/CAD higher.
