The USD/CAD currency pair settled above recent low of 1.3634, its weakest level since October 8th 2024, in the wake of the Bank of Canada’s policy decision and as US job market resilience tempered Fed rate cut expectations.
Employers in the United States added 139,000 jobs in May, representing a slight pullback from April’s downwardly revised growth of 147,000 positions. The latest figure came in ahead of the 130,000 job increase forecast by economists surveyed by Reuters, but still signaled a cooling in hiring activity.
The US unemployment rate remained flat at 4.2%. This aligned with economists’ expectations and suggested a still-resilient labor market.
The jobs data prompted traders to scale back expectations for aggressive monetary easing. Market pricing now suggests that the Federal Reserve is unlikely to take action on interest rates before September.
Meanwhile, the Bank of Canada kept its benchmark interest rate intact at 2.75% at its June 4th policy meeting, in line with market consensus.
This has been the second hold after 225 basis points of rate cuts in seven consecutive meetings.
“With uncertainty about U.S. tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts,” the BoC said in a statement.
“We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs.”
In regard to the future policy interest rate path, Governor Tiff Macklem noted that “there was more diversity of views.”
“On balance, members thought there could be a need for a reduction in the policy rate if the economy weakens in the face of continued U.S. tariffs and uncertainty, and cost pressures on inflation are contained,” Macklem added.
The USD/CAD currency pair settled 0.11% higher at 1.3688 on Friday.
The major Forex pair lost 0.34% for the week.
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