Canadian dollar edges lower ahead of Cdn., US job reports

The Canadian dollar is slightly lower on Friday. In the European session, USD/CAD is trading at 1.3559, up 0.12%.

Canada and the US will both release employment data later today, which could mean some volatility from USD/CAD in the North American session.

Employment in Canada is expected to drop to 25,000 in March, a significant decline from the February gain of 40,700. The labour market remains in good shape but Canada’s rapid population growth has pushed the unemployment rate higher. The unemployment rate rose to 5.8% in February, up from 5.7% a month earlier and is expected to rise again to 5.9% in March.

US nonfarm payrolls expected to slip

The markets are bracing for a sharp drop in US nonfarm payrolls for March. Job growth hit 353,000 in January, but then fell to 275,000 in February and the market estimate for March stands at 200,000. The labour market has stood up well in the face of elevated interest rates but another decline in the March data would indicate a clear downtrend in job growth, which would support the Federal Reserve deciding to lower interest rates sooner rather than later.

All eyes are on the Fed in anticipation of a rate cut later this year, but the Fed’s message this week has not been uniform. Fed Chair Jerome Powell said that although inflation has been bumpy, he expected the Fed to lower rates “at some point this year”. Cleveland Fed President Loretta Mester echoed this position, saying that the Fed was becoming more confident that it could lower rates in the next few months.

Contrast that stance with that of Minneapolis Fed President Neel Kashkari, who questioned if rate cuts were needed this year “if we continue to see inflation moving sideways”. Kashkari does not have a vote on monetary policy but his comments indicate that a rate cut is not a done deal and will depend on the data, in particular inflation.

USD/CAD Technical

• USD/CAD tested resistance at 1.3576 earlier. Then next resistance line is 1.3608
• 1.3527 and 1.3495 are providing support

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