USD/CAD declines as disappointing US NFP figures and higher Oil prices boost the Loonie

Canadian Dollar Rises as US Dollar Weakens and Oil Prices Surge

The Canadian Dollar (CAD) gained ground against the US Dollar (USD) on Friday, as the Greenback lost steam in response to disappointing US Nonfarm Payrolls (NFP) figures. At the same time, the ongoing US-Iran tensions have driven Oil prices higher, further benefiting the commodity-linked Canadian currency.

Currently, USD/CAD is trading near 1.3607, marking a decline of about 0.45% for the day and approaching its lowest point in three weeks. The US Dollar Index (DXY), which measures the USD against six major currencies, has slipped to around 99.00 after reaching a daily peak close to 99.43.

Although the DXY has retreated intraday, it is still poised for a weekly gain, as heightened geopolitical risks between the US and Iran have renewed investor appetite for safe-haven assets like the US Dollar.

US Economic Data Disappoints

The latest US NFP report showed a decrease of 92,000 jobs in February, falling short of the anticipated 59,000 increase. The January figure was also revised downward to 126,000 from 130,000. Meanwhile, the unemployment rate edged up to 4.4%, compared to 4.3% in the previous month.

Despite the overall weak jobs data, wage growth remained robust. Average Hourly Earnings climbed by 0.4% month-over-month in February, matching the previous month and surpassing forecasts of 0.3%. On a yearly basis, wages grew by 3.8%, up from 3.7%.

Retail Sales and Inflation Concerns

Elsewhere, US Retail Sales slipped by 0.2% in January, a smaller drop than the expected 0.3% decline, following a flat result in December. The Retail Sales Control Group, which directly impacts GDP, increased by 0.3%, while sales excluding autos remained unchanged.

The softer-than-expected NFP numbers have heightened worries about a slowing US labor market, prompting the Federal Reserve to remain vigilant as inflation risks persist.

Oil Prices and Canadian Economy

Inflationary pressures have been exacerbated by a sharp rise in Oil prices, fueled by ongoing supply disruptions in the Strait of Hormuz. West Texas Intermediate (WTI) Crude Oil has surged over 30% so far this week, trading near $88.75 per barrel at the latest update.

Qatar’s Energy Minister, Saad al-Kaabi, cautioned that a stoppage of energy exports from the Gulf could send crude prices soaring to $150 per barrel.

For Canada, one of the world’s leading energy exporters, rising Oil prices typically strengthen the Canadian Dollar by boosting national revenues and improving the trade balance.

Canadian Economic Indicators Improve

On the domestic front, Canada’s Ivey Purchasing Managers Index (PMI) jumped to 56.3 in February from 47 previously, indicating renewed growth in business activity. The seasonally adjusted Ivey PMI also rose to 56.6, up from 50.9.