The currency markets are in calm waters today, with one eye on the weekend. The Canadian dollar is no exception, as USD/CAD is unchanged, trading just shy of the 1.26 line.
The Federal Reserve continues to send out hawkish feelers to the markets. On Thursday, Fed member James Bullard weighed in, saying that the Fed is behind in its battle with inflation and needs to increase rates by another 300 points by the end of the year. This would translate into 0.50% hikes at each of the Fed’s six remaining meetings in 2022. Bullard’s stance is more aggressive than the markets, which expect the Fed to raise rates to a range between 2.50% and 2.75% by year’s end.
The Fed minutes indicated that “many” FOMC members are ready to increase rates by 0.50% at upcoming meetings, and we’re seeing this stance in comments from both hawkish and dovish members. Bullard is a hawk, so his comments didn’t move the needle on the US dollar. In contrast, Lael Brainard’s comments about accelerating balance sheet reductions and putting 0.50% hikes on the table sent the dollar higher, since she has been very dovish in her stance.
Canada expected to post strong job numbers
Canada will wrap up the week with the March employment report. The economy added 336 thousand jobs in February, an outstanding performance. The economy is expected to add another 80 thousand jobs, and unemployment is forecast to fall from 5.5% to 5.3%. If today’s report points to a stronger labor market, it will put further pressure on the BoC to raise rates at next week’s meeting. Investors will also be eyeing the possibility that the BoC may follow the Fed’s lead and consider reducing its balance sheet, which would be bullish for the Canadian dollar.
- USD/CAD is pressing on resistance at 1.2595. Above, there is resistance at 1.2676
- There is support at 1.2513 and 1.2432