Ella 
USD/CAD struggled to reverse the previous session’s losses amid a weak U.S. dollar environment.
Canadian employment data is improving, but the Canadian dollar is still under downward pressure.
Investors are awaiting U.S. inflation data for further clues on the outlook for inflation.
USD/CAD is hovering around 1.3630 on Monday in Asia, trying to reverse the previous session’s losses. USD/CAD remains under downward pressure despite positive Canadian industry data for August on Friday.
Canadian employment data showed average hourly earnings (annualized) rose to 5.2% from 5.0% previously. Net employment change in August was 39,900, which was significantly higher than the expected value of 15,000 and fluctuated from the previous value of -64,000. The unemployment rate remained at 5.5%, below expectations of 5.6%.
However, strong wage growth is likely to boost consumer spending and maintain persistent inflationary pressures. This situation could lead the Bank of Canada to consider raising interest rates again.
The U.S. Dollar Index (DXY), which measures the greenback’s performance against six other major currencies, is currently trading around 104.80, just below its peak since April. However, U.S. bond yields have increased, which may weigh on gold prices. The 10-year U.S. Treasury yield rose 0.52% to 4.29%.
The dollar is expected to remain strong, supported by a series of positive economic data reflecting the strength of the U.S. economy. For example, the United States recently reported 216,000 initial jobless claims for the week ended September 2, which was lower than the expected value of 234,000 and lower than last week’s revised value of 229,000. This positive labor data helps the dollar remain resilient.
In addition, Chicago Fed President Austan Goolsbee clarified the central bank’s goal of leading the economy to the “golden path”, that is, there will be no economic recession while inflation falls, which is the Fed’s goal to maintain economic stability and stability. A delicate balance to strive for while growing.
Additionally, investors are seeking further signals on the Federal Reserve’s decision to keep interest rates higher for the long term. Additionally, traders expect the Federal Reserve to raise interest rates by 25 basis points by the end of 2023. This hawkish stance from the Fed may provide potential support for the dollar.
With no important Canadian economic data due, investors are likely to turn their attention to the U.S. Consumer Price Index (CPI) for August, which is scheduled to be released on Wednesday. The data is expected to provide valuable signals on the inflation situation and may influence investors’ decisions on USD/CAD, potentially prompting investors to open new trading positions.
