USD/CAD was little changed in thinned trading on Monday, as market players mulled the latest US employment data prints, which hinted at certain cooling. Those macroeconomic figures also added to expectations that the Federal Reserve may be nearing the end of its policy tightening cycle.
Data showed on Friday that the US economy had added 187,000 jobs in August, exceeding market consensus of 170,000.
August has been the third straight month when job growth remained below the 200,000 threshold, which suggested a gradual easing of labor market conditions.
The rate of unemployment increased to 3.8% in August, the highest level since February 2022, from 3.5% in July.
The number of unemployed persons rose by 514,000 to 6.355 million, while employment increased by 222,000 to 161.484 million.
Average hourly earnings growth moderated, data showed.
Moderating inflation and an easing labor market have added to hopes that the US economy may not slow sharply and may be able to achieve a soft landing.
Still, Citi analysts wrote in a research note that “sticky wage and price inflation will lead to higher-for-longer policy rates and an eventual more substantial slowing of economic activity.”
Market players will be watching closely a number of Federal Reserve officials’ public appearances this week for any hints on monetary policy, with the FOMC expected to meet on September 19th-20th.
Futures markets are pricing in a 93% probability that the Federal Reserve will leave interest rates without change this month. Also, there is an over 60% chance of no further rate hiking this year, according to CME’s FedWatch tool.
Meanwhile, the Bank of Canada is expected to leave its overnight rate intact at 5% at its policy meeting on September 6th, after two 25 basis point hikes in June and July.
As of 7:36 GMT on Monday USD/CAD was inching up 0.02% to trade at 1.3590, while moving within a narrow daily range.
Today is the Labor Day federal holiday in the United States, with markets expected to remain closed.
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