- USD/CAD gains ground around 1.3680 in Friday’s early European European session.
- Fed’s Logan said it’s not clear if policy is tight enough to bring inflation down, adding it’s too soon to cut rates.
- The Canadian economy added 90,000 jobs in April, above the consensus of 20,000 gains.
The USD/CAD pair recovers some lost ground near 1.3680 during the early European session on Monday. Meanwhile, the USD Index (DXY) holds positive ground around 105.30 ahead of the US key economic data. The final reading of the US Consumer Price Index (CPI) will be due on Wednesday, which is expected to show an increase of 3.4% over the year in April, compared to a 3.5% annual rise in March.
The US Federal Reserve (Fed) officials said they are waiting for evidence that inflation is on a downward trajectory before the central bank considers cutting the fed funds rate from the 23-year high. Dallas Fed President Lorie Logan said that it’s not clear if monetary policy is tight enough to bring inflation down to the 2% target and it is too soon to be cutting interest rates.
Additionally, San Francisco Fed President Mary Daly emphasized the need for prolonged restrictive policy to achieve the Fed’s inflation targets. Minneapolis Fed President Neel Kashkari stated that he’s in a ”wait-and-see mode,” and there is a ”high” bar to concluding that higher rates are needed to cool inflation. The cautious approach of the Fed officials provides some support to the Greenback and acts as a tailwind for the USD/CAD pair.
On the other hand, the Canadian economy added 90,000 jobs in April. This figure registered the strongest increase in 15 months and beat the estimation of 20,000 gains, according to Statistics Canada. Furthermore, the Unemployment Rate held at 6.1% in April. The resilience of the labor market affords the Bank of Canada (BoC) more time to wait to ensure that inflation will be sustained. However, the decline in crude oil prices exerts some selling pressure on the Loonie, as Canada is the leading exporter of oil to the United States.