USD/CAD refreshes weekly high above 1.3700 as Fed announces bigger rate hike

• USD/CAD has registered a fresh weekly high at 1.3710 as Fed pushes interest rates to 3.75-4%.
• Market mood has turned extremely soured on Fed’s hawkish guidance.
• Canada’s employment change is seen lower at 10k vs. the prior release of 21.1k.

The USD/CAD pair witnessed a steep reversal after dropping below 1.3560 and registered a fresh weekly high at 1.3710 in no time in the early Tokyo session. The asset picked bids as the Federal Reserve (Fed) has announced the fourth consecutive 75 basis point (bps) rate hike to safeguard the economy from the headwinds of mounting inflationary pressures.

The risk profile has turned extremely negative as guidance from Fed chair Jerome Powell is hawkish as US central bank sees no pause in further policy tightening. This has sent S&P500 into a negative trajectory as earnings guidance has turned subdued. Meanwhile, the US dollar index (DXY) has scrolled above 112.00 after dropping to near 110.43 as rates have been pushed to a 4% trajectory. The 10-year US Treasury yields have jumped to 4.1%.

After a wild gyration, the asset is expected to display a volatility contraction and the focus of investors will shift to the US Nonfarm Payrolls (NFP) data. But before that, Wednesday’s release of US Automatic Data Processing (ADP) Employment Change has remained upbeat. The US economy has added 239k fresh jobs in the labor market, which will support the Fed to keep up the pace of the hiking rate further.

The US NFP is seen lower at 200k vs. the prior release of 263k. While the unemployment Rate will increase to 3.6%.

Meanwhile, loonie investors are also awaiting the release of the employment data. The Net Change in Employment is seen lower at 10k against the former figure of 21.1k. While the jobless rate is seen lower at 5.2%.

On the oil front, oil prices are looking to recapture the critical hurdle of $90.00 for the first time in the past three weeks. A decline in crude oil inventories reported by the Energy Information Administration (EIA) has infused fresh blood in the oil bulls. The oil stockpiles dropped by 3.115M barrels against the projection of an increment of 0.367M barrels.