The US Dollar rose slightly against the Canadian Dollar at 1.3970 following a recovery from a recent low of 1.3940. Despite this, the broader trend remains downward, with the currency devaluing by over 1% in under two weeks due to differing monetary policies between the Bank of Canada and the US Federal Reserve.<\/p>\n
The US labor market garnered attention with the ADP Employment Change report showing a loss of 32,000 jobs in November. This was contrary to a market expectation of a 5,000 job increase and followed October’s revised gain of 47,000 jobs. Additionally, the US Challenger Job Cuts showed 71,321K layoffs in November, a drop from September’s 153,074K. First-time unemployment benefit claims are anticipated to rise to 220,000, up from 216,000 in the previous week.<\/p>\n
In Canada, the IVEY Purchasing Managers’ Index is expected to rise to 53.6 from October’s 52.4 score. This improvement follows robust Q3 GDP data, likely supporting the Bank of Canada’s decision to maintain current interest rates in December.<\/p>\n
The US Federal Reserve is likely to reduce rates following its December meeting, with an 89% chance of a 25 basis point cut and further reductions anticipated next year, pressuring the US Dollar.<\/p>\n
The US Dollar is seeing a small bounce today, but the bigger picture for the currency against the Canadian Dollar remains weak. We’ve seen it fall over 1% in less than two weeks, and this trend is driven by the growing difference between the US and Canadian central bank policies. This divergence is becoming the most important factor for the currency pair.<\/p>\n
The surprise loss of 32,000 private jobs reported by ADP is a serious warning sign for the US economy, especially coming before the official Non-Farm Payrolls (NFP) report tomorrow. We are now seeing economists adjust their NFP forecasts, with some predicting the first negative print since the brief slowdown in 2024. This pattern of rapidly weakening labor data is reminiscent of what we observed in late 2023, which confirmed the end of that historic rate-hiking cycle.<\/p>\n
Markets are now convinced the Federal Reserve will act, with an 89% chance of a rate cut priced in for the meeting next week on December 10th. Looking further out, interest rate futures show the market expects at least two or three more cuts in 2026. This aggressive easing path is what is keeping heavy pressure on the US dollar.<\/p>\n
Meanwhile, Canada’s economy looks much stronger, supported by solid Q3 GDP figures and an expected improvement in today’s Ivey PMI report. This data gives the Bank of Canada a reason to keep its interest rate on hold in December, standing apart from the Fed. This growing policy gap is the primary reason for the Canadian dollar’s relative strength.<\/p>\n
For derivative traders, this situation points towards continued weakness in the USD\/CAD pair. With major events like the NFP report tomorrow and the Fed decision next week, we expect volatility to rise, making options more interesting. Strategies like buying USD\/CAD put options that expire after the Fed meeting could be a direct way to position for a lower exchange rate.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" US Dollar edges higher to 1.3970 against Canadian Dollar, but broader trend remains downward amid policy shifts.<\/p>\n","protected":false},"author":62,"featured_media":16963,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-36027","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t