The USD/CAD currency pair experienced a decline, falling to around 1.4300 during North American trading on Friday, following the release of key employment data from both the United States and Canada.
Canada’s labor market report for January exceeded expectations, with the economy adding 76,000 jobs, significantly surpassing the forecast of 25,000 but still falling short of the 91,000 jobs added in December. The country’s unemployment rate decreased to 6.6%, better than the anticipated 6.8% and down from the previous 6.7%. This stronger-than-expected data provided some relief for Canada, as it signals a robust labor market despite concerns over potential economic slowdown. While the positive employment figures indicate that the Bank of Canada’s (BoC) previous interest rate cuts may be having a positive impact, traders are unlikely to revise their dovish expectations for the BoC, given lingering concerns about inflation falling short of the central bank’s 2% target.
On the other hand, U.S. employment data painted a more subdued picture. The Nonfarm Payrolls (NFP) report revealed that the U.S. economy added 143,000 jobs in January, far below the forecasted 170,000 and a sharp drop from the revised 307,000 added in December. The unemployment rate, however, decreased to 4.0%, a better result than expected and down from 4.1% previously.
Despite the weak job growth, the U.S. data showed surprising strength in wages. The Average Hourly Earnings (AHE) data, a critical indicator of wage inflation, rose by 4.1% year-on-year, surpassing the December increase of 3.9%. On a month-to-month basis, AHE grew by 0.5%, above both the forecasted 0.3% and the prior month’s 0.3% increase. This strong wage growth is likely to fuel speculation that the Federal Reserve may keep interest rates elevated for an extended period to curb inflation.
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