USD/CAD settles below 10-week high, posts weekly gain

The USD/CAD currency pair settled below Friday’s high of 1.3879, its strongest level since May 22nd, in the wake of central bank policy decisions and as US job growth slowed sharply in July, indicating the labor market could be stalling.

Employers in all sectors of the US economy, excluding farming, added just 73,000 job positions in July, well below estimates of 110,000.

Also, June’s job gains were revised sharply lower to 14,000.

At the same time, the unemployment rate went up to 4.2%, as expected, from 4.1% in June.

The latest figures prompted investors to increase bets on how many times the Federal Reserve will likely lower interest rates this year.

Markets are now pricing in 54 basis points of rate cuts by year-end, compared to about 34 basis points on Thursday. The first cut is again expected in September.

The Fed kept its federal funds rate target range without change at 4.25%-4.50% at its July meeting, in line with market consensus.

Yet, two governors dissented in favor of a rate cut, which has been the first such dual dissent since 1993.

The Fed continued its wait-and-see approach amid concerns that the ongoing trade war could undermine progress toward the 2% inflation objective.

Fed Chair Jerome Powell said the central bank had not decided about September, while noting that “downside risks to labor market are certainly apparent.”

Meanwhile, the Bank of Canada kept its benchmark interest rate intact at 2.75% at its July 30th policy meeting, in line with market consensus.

This has been the third hold after 225 basis points of rate cuts in seven consecutive meetings.

Policy makers noted that the Canadian economy had so far remained resilient to tariffs already mandated, as employment keeps holding up and second-half growth forecasts remain optimistic under the current tariff scenario.

Yet, the economy is due to contract in Q2, as exporters received fewer orders after front-loading deliveries in Q1.