USD/CAD advances to near 1.4450 as US jobs figures bolster hawkish mood surrounding Fed

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• USD/CAD extends its winning streak as traders expect the Fed to keep interest rates steady in January.

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• US Nonfarm Payrolls increased by 256K in December, exceeding expected 160K and November’s figure of 212K.

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• The downside of the commodity-linked CAD could be restrained due to higher Oil prices.

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USD/CAD continues to gain ground for the fifth successive day, trading around 1.4440 during the European hours on Monday. However, the USD/CAD pair appreciated as the US Dollar (USD) strengthened as the robust US labor market data for December will likely reinforce the US Federal Reserve's (Fed) stance to keep interest rates steady in January.

The US Dollar Index (DXY), which tracks the US Dollar’s (USD) performance against six major currencies, reached to 109.98, the highest level since November 2022, during the Asian hours on Monday. Additionally, higher yields are contributing support for the Greenback, with 2-year and 10-year US Treasury bond yields standing at 4.41% and 4.79%, respectively, at the time of writing.

Data from the US Bureau of Labor Statistics (BLS), released on Friday, reported that Nonfarm Payrolls (NFP) increased by 256K in December, significantly exceeding market expectations of 160K and surpassing the revised November figure of 212K (previously reported as 227K). Moreover, the US Unemployment Rate edged down to 4.1% in December from 4.2% in November. However, annual wage inflation, measured by the change in Average Hourly Earnings, dipped slightly to 3.9% from 4% in the prior reading.

Additionally, the risk-sensitive Canadian Dollar (CAD) faces downward pressure amid growing concerns over President-elect Donald Trump's promises to impose tariffs on imports. "We are assuming that Trump implements tariffs on Canada this year, which is likely to weigh on the loonie," said Stephen Brown, Deputy Chief North America Economist at Capital Economics. On Sunday, Canadian Prime Minister Justin Trudeau stated that while the government is not seeking a trade war with the new administration, it will have to respond if the US imposes tariffs on Canadian goods.

However, the commodity-linked CAD may limit its losses as rising Oil prices provide support, given Canada’s position as the largest Oil exporter to the United States (US). West Texas Intermediate (WTI) extends its rally for the third consecutive session, trading near $77.00 per barrel, just below the $77.46 mark reached on Monday, the highest level since October 8. Crude Oil prices continue to rise amid heightened concerns over potential supply disruptions driven by new US sanctions on Russia's Oil industry.