USD/CAD struggles to hold above 1.3500 amid weak US labor ADP

• USD/CAD sees downside below 1.3500 as weak US ADP private payrolls data sent the US dollar into the woods.
• Fresh private payrolls come in surprisingly lower at 99,000 than estimates of 145,000.
• The BoC is expected to improve its interest rate policy.

The USD/CAD pair is under pressure to maintain the psychological support of 1.3500 in the Thursday session in New York. Loonie assets are feeling selling pressure as United States (US) automatic data processing (ADP) employment came in surprisingly weaker than expected.

The agency reported that there were 99,000 fresh payrolls in the private sector in August. Investors anticipated that private employers hired 145,000 jobseekers, up from July’s figure of 111,000, revised down from 122,000. This deepened fears of deteriorating labor market conditions and raised expectations that the Federal Reserve (Fed) will begin aggressively cutting interest rates this month.

The Fed’s increased bets on high rates have weighed heavily on the US dollar (USD). The US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, is down to near 101.00.

Going forward, investors will focus on US ISM services PMI data for August due at 14:00 GMT.

Meanwhile, the Canadian dollar (CAD) remains under pressure as market participants see the Bank of Canada (BoC) continuing its period of policy easing. The BdC cut its interest rates by 25 basis points (bps) to 4.25% on Wednesday. This was the third consecutive announcement of a 25 basis point interest rate cut by the BoC. Analysts at ING said in a note on Wednesday: “Essentially, we see the BoC cutting rates by 25bps at each meeting until next summer, when the policy rate is expected to drop to 3%.

Going forward, the Canadian dollar will be influenced by August labor market data, which will be released on Friday. The employment report is expected to show Canadian employers hired 26,500 job seekers after shedding 2,800 workers in July. The unemployment rate is still seen rising to 6.5% from the previous release of 6.4%.