USD/CAD Declines as Economic Risks Mount After Soft Jobs Data
The Canadian dollar is holding steady at the start of the week. The USD/CAD pair is currently trading at 1.4385, a slight increase of 0.06% today. The Canadian dollar experienced a 0.50% drop on Friday following a weaker-than-expected Canadian jobs report.
Canada's Job Growth Stalls
In February, the Canadian economy added a mere 1.1 thousand jobs, significantly below the anticipated 20 thousand, and a sharp contrast to January's robust 76 thousand. While there was a hiring surge in the preceding three months, February saw a downturn, with full-time employment decreasing by 19.7 thousand. However, the unemployment rate remained stable at 6.6% for the third consecutive month, which is below the projected 6.7%.
This lackluster jobs report may reflect growing concerns regarding potential US tariffs, which have negatively impacted business sentiment. Although the US has implemented tariffs against Canada, there's a temporary 30-day suspension on auto tariffs under the USMCA. Canada has responded with counter-tariffs, but its economy is heavily reliant on the US, and a prolonged trade conflict could push Canada into a recession.
Bank of Canada's Dilemma
For the Bank of Canada, the recent employment data strengthens the argument for maintaining current rates at the March 12 meeting. Odds of a rate cut have risen to 87%, a notable jump from 50% earlier in March. The central bank faces a challenging situation, as inflation persists while US trade policies pose a threat to economic stability.
US Nonfarm Payrolls See Modest Increase
In the United States, nonfarm payrolls increased by 151 thousand in February, an improvement from January's revised figure of 125 thousand, but less than the expected 160 thousand. The unemployment rate increased slightly to 4.1% from 4%. While the report was reasonably positive, the looming possibility of US tariffs continues to cast a shadow over the economic future.
Technical Analysis of USD/CAD
- The USD/CAD pair is currently testing support at 1.4362. If it falls below this level, the next support is at 1.4298.
- Resistance levels can be found at 1.4445 and 1.4509.