US Labor Market Update
The US Department of Labor reported a drop in Initial Jobless Claims to 215,000 for the week ending April 12, surpassing forecasts. Meanwhile, Continuing Claims increased by 41,000 to 1.885 million for the week ending April 5.
USD/CAD gains may be limited as the Canadian Dollar could be bolstered by stronger crude Oil prices. Oil prices rallied after US sanctions on Iran, raising concerns about global supply, amid uncertainty over potential US tariffs on key commodities.
The Bank of Canada expressed concerns about a Trump-era trade war-induced recession. It warned of potential inflation spikes but refrained from updating forecasts, citing US tariff policy uncertainty and its impact on Canada’s outlook.
What we’ve seen in recent sessions is a fairly textbook currency stabilisation around 1.3860, catalysed by Powell’s latest stance—where he nudged market attention back to inflation. His remarks were enough to arrest the pullback that emerged over the past two days and, in doing so, helped to give the US Dollar that slight bump we’ve been watching for. With markets heading into a period of lighter volume due to the Good Friday closure, there wasn’t enough liquidity to push the pair far in either direction, leaving things looking paused rather than completed.
Powell emphasised inflationary risks to the Federal Reserve’s dual mandate, and that injected a bit of energy back into USD positioning. In terms of interest rate expectations, what’s unfolding now is a fine-tuning across mid-curve pricing—futures are currently projecting around 86bps of easing into late next year. That adjustment, filtered through Powell’s framing, reduces the likelihood of a swift July cut, even if market-implied probabilities still lean in that direction for now.
Commodity Influence and Fiscal Considerations
On the fiscal side, Trump’s latest dig at Powell does little more than add political noise, but it sharply reminds markets of what’s possibly to come should White House dynamics shift in the next election cycle. Fiscal headlines like this may not directly reprice short-term interest rate instruments, but they nudge volatility higher and influence expectations on clarity—something rate traders do not get for free.
Elsewhere, fresh US labour market figures offered a two-way read. First, Initial Jobless Claims surprised by dropping to 215,000—comfortably under economist estimates. That’s a bullish data beat in the context of employment resilience. But Continuing Claims rose to 1.885 million. That small climb prompts attention; it could hint that rehiring isn’t keeping pace with layoffs. From our standpoint, it neither confirms tightening nor softens things dramatically, but it complicates the job of interpreting labour slack this deep into the cycle.
