Ella 
USD/CAD is consolidating its recent gains around 1.3680 during the Asian morning session on Friday. USD/CAD retreated from 1.3694 (the highest level since March), with key resistance around 1.3700.
The dollar rose to its highest level since early March above the 105.00 area following the release of U.S. economic data on Thursday. The U.S. Department of Labor reported on Thursday that initial jobless claims in the U.S. were 216,000 for the week ended Sept. 2. This was better than expectations of 234K, after a revised 229K the previous week (previously 228K). Meanwhile, non-farm productivity rose 3.5%, missing expectations for a 3.8% increase and was revised from a first estimate of 3.7%.
New York Fed President John Williams said inflation is heading in the right direction, but added that more information is needed before making a decision. Chicago Fed President Austan Goolsbee said the central bank is likely to achieve the golden path of eliminating inflation while avoiding recession.
That said, U.S. economic data provided support for the “higher rates are better” narrative, boosting the greenback across the board. The CME FedWatch tool showed markets are pricing in a 93% chance of keeping rates at the September meeting, compared with about a 51% chance of a rate hike at the November meeting.
On the other hand, Bank of Canada (BOC) Governor Tiff Macklem (Tiff Macklem) said on Thursday that monetary policy may be appropriately restrictive to restore price stability, but Macklem cautioned that the Governing Council There are concerns about the persistence of underlying inflation. Notably, the Bank of Canada decided to keep its key interest rate at 5% at its policy meeting on Wednesday.
On the data front, Canada’s Ivey Purchasing Managers’ Index (PMI) came in at 53.5 in August, up from 48.6 previously. The data was better than expectations of 49.2. Notably, Canada’s August Ivey PMI reading above 50 points to expansion in business activity. CAD/USD rose after the above data was released. However, lower oil prices limited the loonie’s upside as Canada is the largest exporter of crude oil to the United States.
Next, market participants will wait for Canadian labor force data due on Friday to inject fresh impetus into the market. The market expects the Canadian economy to have added 15,000 jobs in August. Weaker-than-expected Canadian jobs data could weigh on the Canadian dollar. In addition, Canada’s August unemployment rate will also be released on the same day. These data may point the way for the USD/CAD currency pair.
