Positive Market Sentiment Pushes CAD to Minor Gains

The Canadian Dollar has seen minor gains on Monday, extending its rebound from year-to-date lows after Friday’s upbeat Ivey PMI. This is due to a modest appetite for risk on a calm weekly opening, which allows some US Dollar pullback ahead of key macroeconomic data this week. The US economy created far more jobs than expected in March, while wage growth moderated, although it is still at levels inconsistent with the Federal Reserve’s 2% core inflation target for price stability.

Investors are looking for the sidelines on Monday, awaiting the US CPI figures on Wednesday to check whether the recent uptick on inflation is an exception or a structural trend. Additionally, the Bank of Canada (BoC) will release its monetary policy decision on Wednesday, with a minor risk of an unexpected rate cut that would send the CAD tumbling.

On Friday, US Nonfarm Payrolls increased by 303K in March from 270K in February, well above the 200K forecasted by market experts. Average Hourly Earnings increased at a 0.3% monthly pace and 4.1% YoY from 0.2% and 4.3%, respectively, in February. The Canadian Ivey Purchasing Managers Index has improved to 57.7, its best reading over the last 12 months, from 53.9 in February.

The percentage change of the US Dollar against listed major currencies today is shown in a heat map, with the US Dollar being the strongest against the Swiss Franc. Technical indicators show the US Dollar on a bullish trend, with the structure of higher highs and higher lows intact.