USD/CAD trades in negative territory near 1.4380 in Tuesday’s early European session.
A rise in crude oil prices and stronger Canadian job reports support the CAD.
Investors dial back bets on Fed rate cuts in 2025.
The USD/CAD pair remains weak around 1.4380 during the early European trading hours on Tuesday. The stronger-than-expected Canadian December labor market data and a surge in crude oil prices underpin the Canadian Dollar (CAD) against the Greenback. Traders will take more cues from the US December Producer Price Index (PPI), which will be released later on Tuesday.
Traders have become slightly less confident the Bank of Canada (BoC) will continue cutting interest rates in the January meeting after data on Friday showed that the Canadian economy added more jobs than expected in December. The possibility of an interest rate cut from the BoC on January 29 declined to 61%, down from 70% before the labor market data, according to Reuters.
Furthermore, higher crude oil prices amid wider United States (US) sanctions on Russian oil boost the commodity-linked Loonie, as Canada is the largest oil exporter to the US.
On the US front, the Bureau of Labor Statistics indicated on Friday that Nonfarm Payrolls (NFP) increased by 256,000 jobs in December, the most since March, while the Unemployment Rate fell to 4.1% during the same report period. This reading could reinforce bets that the US central bank will maintain a hawkish stance through most of the year, which might lift the USD. The markets are discounting the chances at 2.7% for a 25 basis points (bps) rate cut at the January 28-29 FOMC meeting, according to the CME FedWatch tool.
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