The USD/CAD pair continues to trade negatively around 1.3605 in the early Asian session on Friday, marking the fourth consecutive day of decline. The weakening US Dollar is a key factor driving this downtrend, with recent discouraging US economic data increasing the likelihood of a Fed rate cut in September.
Market expectations for the US employment report suggest a slowdown in employment growth, with a forecasted increase of 190,000 in Nonfarm Payrolls (NFP) for June. The Unemployment Rate is expected to remain at 4.0%, partly due to a predicted decline in the participation rate.
The softer US PCE inflation and weaker Services PMI have raised expectations for a Fed rate cut in September, with markets pricing in a 70% probability before the NFP release. Additionally, a second rate cut in December is also anticipated, with an 80% probability priced in. These factors are putting pressure on the US Dollar.
On the Canadian front, the Net Change in Employment is forecasted to decrease to 22.5K from the previous reading of 26.7K. The Canadian Unemployment Rate is expected to rise to 6.3% from 6.2%. The modest decline in crude oil prices may also impact the Canadian Dollar, as Canada is a major exporter of oil to the US.
Various factors influence the value of the Canadian Dollar, including interest rates set by the Bank of Canada, the price of oil (Canada’s largest export), the health of the economy, inflation, and trade balance. Market sentiment, particularly related to the US economy, also plays a significant role in determining the strength of the Canadian Dollar.