USD/CAD pierces 1.3600 as US jobless claims edge down

On Thursday, the US Department of Labor (DoL) revealed that Initial Jobless Claims for the week ending February 25 came at 190K below the 195K foreseen by analysts. The 4-week moving average, which smooths volatile movement from week to week, stood at 193K and climbed from last week’s 191K. The USD/CAD rose and printed a daily high of 1.3641 before settling at current levels.

Since then, the US !0-year Treasury bond yield skyrocketed above the 4% threshold, at the time of writing, stands at 4.056%, gains six basis points, and underpins the greenback. The US Dollar Index (DXY), a gauge of the buck’s value vs. a basket of six currencies, gains 0.55% at 104.944.

On Wednesday, Federal Reserve officials continued their hawkish rhetoric after last week’s data disappointed investors hopeful of witnessing lower inflation readings. Minnesota Fed President Neil Kashkari commented that he is inclined “to push up my policy path” and foresees the Federal Fund Rate (FFR) to peak at around 5.4%. Echoing some of his comments was Atlanta’s Fed President Raphael Bostic though he was moderate, projects the FFR to peak at 5.0% - 5.25% but emphasized that it will stay there “well into 2024.”

On the Canadian front, traders should be aware that the Bank of Canada (BoC) lifted rates 25 bps to 4.50% on January 25 and commented that it would pause hiking rates. Therefore, that would keep the Loone (CAD) pressured as interest rate differentials between the Fed and the BoC would increase flows to the US Dollar. Given the backdrop, the USD/CAD path of least resistance is upwards.

The USD/CAD rally was capped by high oil prices, as WTI extended its rally to three days, with investors assessing China’s oil demand once it completes its reopening.