Where we are: USD/CAD is currently trading at 1.3686, up 0.18% on the day, testing the upper end of its intraday range of 1.3643-1.3693. The pair has edged higher through the Asian and European sessions, partially retracing the dip seen earlier in the week. The market is holding just below the prior swing high, with traders eyeing the 1.3700 handle as resistance.
What’s driving it: The Bank of Canada’s easing bias is still weighing on the Loonie, despite recent positive GDP data. Macklem’s comments following the April meeting highlighted concerns around tariff uncertainty and a softer growth path, keeping the prospect of future rate cuts alive, particularly if domestic demand continues to weaken. The 10Y Canadian yield is down 4bp d/d to 3.459%, further reflecting the market’s view of a potentially dovish BoC. While higher oil prices could typically support the CAD, WTI crude is down over 2% today, trading near $95/bbl, offsetting some of that traditional tailwind. This provides limited support ahead of today’s critical employment data.
- BoC Governor Macklem highlighted “tariff uncertainty and softer growth path” as primary drivers for a still-present easing bias.
- Canadian 10Y yields are down 4bp today.
- CFTC data shows net non-commercial CAD positioning at -38,476 contracts, implying some room for short covering, but not at an extreme.
NY session focus: All eyes are on the 08:30 ET release of Canadian employment change and unemployment rate, alongside the US jobs report. Strong Canadian data could offer some support to the CAD, potentially pushing USD/CAD back towards the 1.3600 level, while weak data could exacerbate the current upward trend. US average hourly earnings and non-farm payrolls, also at 08:30 ET, will be crucial for broader USD direction and risk sentiment. Focus on whether the US-CA 10Y yield spread will widen or contract. The pain trade here is a significant downside surprise in US payrolls triggering a broad risk-on move that simultaneously lifts oil and pulls down USD.