USD / CAD Investors Watch Key Support In The 1.3580s

USD / CAD is unchanged at the close of the week in Asia, with the price hovering around 1.3580, below the day's highs of 1.3601.

The US Dollar rose on Thursday as Unemployment Claims indicated a robust US labor market. As a result, the yield on two-year Treasury notes, which is sensitive to interest rate expectations, increased to levels last seen in July 2007. Futures edged higher, with the market pricing a highest fed funds rate of 5.493% in September before moderating to 5.447% later in the session.

The focus is on the Federal Reserve, and Atlanta Fed President Raphael Bostic said on Thursday that they are prepared to continue raising rates if inflation does not moderate, and that they are still pondering how recent, stronger-than-expected inflation data may impact Fed policy. The impact of higher rates on the economy may not begin to "bite" in earnest until this spring, arguing that the Fed should continue with "consistent" quarter-point rate increases.

Meanwhile domestically, economic data in Canada has shown that growth was flat SAAR vs. 1.6% expected and a revised 2.3% (was 2.9%) in Q3 and was the weakest since Q2 2021. GDP fell 0.1% month-over-month in December, versus the 0.1% expected, and this dragged the annual growth rate down to 2.3% from 2.8% in November. Expectations from the Bank of Canada have not changed much. No change is anticipated at the next meeting on March 8, but WIRP indicates that a final 25-bp increase to 4.75% is still priced in for Q3. The BoC has indicated a halt in its increasing cycle, and in light of this, the Canadian dollar is likely to continue to struggle to gain ground against the USD.