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The USD/CAD pair rose 0.14% on Friday following a stronger-than-expected U.S. Nonfarm Payrolls (NFP) report, which added 254,000 jobs in May—tripling economists' forecasts of 80,000. The U.S. Bureau of Labor Statistics (BLS) reported the surge, driven by gains in healthcare, manufacturing, and professional services. This data reinforced expectations of prolonged higher interest rates by the Federal Reserve, boosting the dollar's appeal.
The strong employment data signals robust U.S. economic momentum, which could delay Fed rate cuts and strengthen the USD against peers like the Canadian dollar (CAD), a commodity-linked currency. Traders are now pricing in a higher probability of a 25-basis-point rate hike at the June Fed meeting, with the USD/CAD pair testing key resistance levels near 1.3500. The report also pressures CAD, which often weakens amid rising oil prices and stronger USD demand.
For markets, the focus shifts to the Fed's upcoming policy statement and inflation data to confirm wage growth trends. Investors should monitor USD/CAD for potential breakouts above 1.3500, which could signal a shift in dollar strength. Central bank rhetoric and geopolitical risks in the Gulf may further influence regional forex flows.
