USD/CAD rebounds strongly near 1.3500 after US/Canada hiring release

• USD/CAD rebounds strongly to near 1.3500 as the US dollar reverses losses following the release of US NFP data for August.
• Slower-than-expected U.S. job growth raises expectations for a Fed rate cut this month.
• Canada’s unemployment rate continues to rise to 6.6%.

The USD/CAD pair is quickly recovering to close to the round level support of 1.3500 in the US session on Friday. Loonie asset turns volatile after release of US/Canada employment data for June.

The US Nonfarm Payrolls (NFP) report showed that job demand turned out to be weaker than expected. The number of employed workers was 142,000, lower than the 16,00 estimate but higher than the previous edition of 89,000, revised down from 114,000. The unemployment rate fell to 4.2%, as expected from the previous release of 4.3%.

Meanwhile, average hourly earnings accelerated at a faster-than-expected pace. Annually, the pace of wage growth rises to 3.8% from estimates of 3.7% and the previous release of 3.6%. This renewed fears that price pressures would remain persistent. However, it is unlikely to influence market speculation for the Federal Reserve’s (Fed) interest rate path as the central bank is more focused on preventing job losses.

The US Dollar Index (DXY), which tracks the greenback against six major currencies, is recovering intraday losses and rising to near 101.20.

In Canada, the labor market saw a new addition of 22,1000 job seekers. Employment growth was slower than expected, as market participants expected the hiring of 25,000 workers. In July, Canadian labor market data faced an unexpected decline as 1.4 thousand workers were laid off. Meanwhile, the Unemployment Rate rose further to 6.6%, above estimates of 6.5% and the previous release of 6.4%.

Average hourly earnings fell sharply to 4.9 percent from the previous reading of 5.2 percent. Rising unemployment and easing the pace of wage growth would drive expectations for more interest rate cuts from the Bank of Canada (BoC).