Anna 
In the early American session on Friday, the USD/CAD pair surged to a fresh four-month high, reaching 1.3640. The rally in the Loonie came as the United States Bureau of Labor Statistics (BLS) reported robust Nonfarm Payrolls, while Statistics Canada unveiled disappointing Employment data for March.
The US NFP data revealed an impressive addition of 303,000 new payrolls, surpassing expectations of 200,000 and the previous reading of 270,000. Concurrently, the Unemployment Rate dropped to 3.8%, contrasting with the consensus and the prior reading of 3.9%. The strong labor market performance tempered expectations of the Federal Reserve (Fed) initiating interest rate cuts, which were previously anticipated at the June meeting.
Typically, robust labor demand leads to increased wage growth as employers compete for workers, thereby fueling consumer spending and keeping inflation elevated.
Minneapolis Fed Bank President Neel Kashkari’s comments on Thursday, suggesting that rate cuts might be unnecessary if inflation remains stable, added to the sentiment. Kashkari had previously projected two rate cuts by 2024 in the Fed’s dot plot.
The strength in labor demand bolstered the appeal of the US Dollar, as evidenced by the US Dollar Index (DXY) extending its gains to 104.65 against a basket of six major currencies.
Conversely, the Canadian Dollar weakened as the labor market witnessed layoffs during the month. Canada reported a decline of 2.2K workers, contrasting with investors’ expectations of a gain of 25K jobs. Additionally, the Unemployment Rate surged to 6.1%, exceeding forecasts of 5.9% and the prior reading of 5.8%. However, annual Average Hourly Earnings grew at a faster pace of 5.0% compared to 4.9% in February.
The disappointing labor market data from Canada has raised expectations for the Bank of Canada (BoC) to consider rate cuts sooner rather than later.
