USD/CAD drops to near 1.3450, awaits labor data from US, Canada

• USD/CAD continues its losing streak on higher Crude oil prices.
• Canada’s Unemployment Rate is anticipated to reach 5.8% from 5.7 prior.
• US Nonfarm Payrolls could print a 200K figure for new jobs created in February, against 353K prior.

USD/CAD extends its losses for the third consecutive session on Friday, trading lower to near 1.3450 during the Asian hours. Market participants look forward to the labor data from Statistics Canada on Friday. February’s Unemployment Rate is expected to increase by 5.8% against 5.7 prior. Net Change in Employment is anticipated to print 20K against the previous figure of 37.3K.

The higher Crude oil prices contribute to underpinning the Canadian Dollar (CAD) and, consequently, act as a headwind for the USD/CAD pair. West Texas Intermediate (WTI) inches higher to near $78.90, at the time of writing.

Economists at ING have highlighted the persistent correlation between the Canadian dollar (CAD) and US data, as well as the strong connection between policy expectations of the Federal Reserve (Fed) and the Bank of Canada (BoC). Consequently, they suggest that significant movements in either direction for the USD/CAD pair appear unlikely at this time.

US Dollar Index (DXY) attempts to snap its losing streak ahead of the employment figures from the United States (US), hovering around 102 80, by the press time. US Initial Jobless Claims printed 217K reading for the previous week, surpassing the expectations of 215K. Meanwhile, US Nonfarm Productivity remained consistent, maintaining growth at 3.2% in the fourth quarter of 2023, against the market expectations of 3.1%. Friday is set to release employment numbers from the United States (US), which includes Average Hourly Earnings and Nonfarm Payrolls.

Federal Reserve (Fed) is expected to initiate an interest rate cut cycle starting from June. Fed Chair Jerome Powell reiterated the central bank's stance during his second day of testimony before the US Congress, further fueling speculation regarding potential rate cuts. Powell suggested that cuts in borrowing costs could occur sometime this year, with the condition that the inflation trajectory aligns with the Fed's 2% target.