USD/CAD Drops to 1.3675 Amidst Weaker US Dollar

Quick Look:

• USD/CAD edged lower to 1.3675 due to a weaker US Dollar.
• US Data key reports include ADP Employment Change, ISM Services PMI, and FOMC Minutes.
• Canadian employment data will be released on Friday, providing insights into Canada’s labour market.
• June’s PMI at 49.3 indicates ongoing contraction, the longest since 2010.

As we enter the early Asian trading hours on Wednesday, the USD/CAD pair has edged lower, reflecting the current price of 1.3675. This subtle movement results from a weaker US Dollar (USD), setting the stage for an interesting series of financial events and data releases slated for the week.

Key Events to Watch This Week

Market participants anticipate a trifecta of pivotal US data releases scheduled for Wednesday. These include the US ADP Employment Change, the ISM Services PMI for June, and the Federal Open Market Committee (FOMC) Minutes. Each report potentially sways market sentiment and, consequently, the USD/CAD exchange rate.

On the Canadian front, investors are gearing up for Friday’s release of employment data. This data will provide critical insights into the Canadian labour market, potentially influencing the direction of the CAD.

Jerome Powell’s Remarks and Market Impact

Federal Reserve (Fed) Chair Jerome Powell made headlines Tuesday with his comments on the US economy. Powell asserted that the Fed is getting back on the disinflationary path. However, Powell wants to see further evidence before cutting interest rates as the US economy and the labor market remain strong.

In addition to Powell, Chicago Fed President Austan Goolsbee shared an optimistic outlook, stating that progress on the final chunk of inflation heading towards the Fed’s 2% inflation target will happen faster than many expect. Such statements provide a nuanced perspective on the Fed’s approach to managing inflation and interest rates, adding layers to the market’s anticipation of upcoming economic data.

US JOLTS Job Openings Beat Expectations

Tuesday’s release of May’s US JOLTS Job Openings data revealed 8.14 million job openings, surpassing the forecast of 7.91 million. This figure, reported by the US Bureau of Labor Statistics, also showed an upward revision from the previous value of 7.91 million to 8.05 million. Such robust data underscores the strength of the US labour market despite broader economic uncertainties.

Canadian Manufacturing Struggles

While the US showcases resilience, the Canadian manufacturing sector paints a contrasting picture. June’s S&P Global Manufacturing PMI registered at 49.3, missing the market expectation of 50.2. This marks the 14th consecutive month of contraction, the longest run since October 2010. The primary causes include declining new orders and firms cutting jobs for the first time in five months, highlighting ongoing challenges within the sector.

Upcoming Canadian Employment Data

As we approach Friday, all eyes will be on the Canadian employment data. Current expectations suggest an unemployment rate of 6.3% for June, with an anticipated 22.5K jobs added during the month. This data will be crucial in assessing Canada’s overall economic health and labour market conditions, potentially influencing the CAD’s performance against the USD.

The USD/CAD exchange rate’s recent movements and the array of upcoming economic data releases from the US and Canada create a dynamic and closely watched trading environment. Market participants will keenly analyze these developments to gauge their potential impact on future trading decisions.