The USD/CAD pair rebounded from a one-week low, climbing back above 1.4300, as traders positioned ahead of upcoming U.S. and Canadian employment reports. The move comes amid shifting expectations for interest rates, with investors closely watching labor market data for clues on the next steps from the Federal Reserve and the Bank of Canada.
After a brief dip, the U.S. dollar regained traction, supported by persistent risk-off sentiment and demand for safe-haven assets. Treasury yields stabilized, providing additional strength to the greenback, while the Canadian dollar struggled to hold its gains despite firm energy prices. The loonie often finds support from oil markets, but uncertainty over global growth and monetary policy has kept gains in check.
Market participants are now awaiting U.S. nonfarm payrolls data, which could influence the Fed’s monetary policy outlook. A stronger-than-expected jobs report may reinforce expectations that interest rates will stay higher for longer, boosting the USD/CAD pair further. Conversely, weaker numbers could reignite talks of an earlier rate cut, pressuring the dollar and allowing the loonie to recover ground.
On the Canadian side, the labor market report will be equally critical. Any signs of slowing job growth or wage pressures could increase speculation that the Bank of Canada may lean more dovish in the coming months. However, if employment figures surprise to the upside, the Canadian dollar could find some relief, potentially capping the recent USD/CAD rally.
For now, traders remain cautious, keeping a close eye on broader market sentiment and central bank commentary. Volatility is likely to pick up as fresh economic data rolls in, with the USD/CAD pair at a pivotal level ahead of these key reports. Whether the rebound above 1.4300 holds will largely depend on how the labor market figures shape rate expectations on both sides of the border.
