Recent data and market commentary highlight a nuanced picture for North American currencies. In the United States, private-sector hiring has cooled, with the ADP Employment Change 4-week average rising to 29,000 jobs per week for the period ending May 23, a slight downtick from the previous reading, suggesting a potential impasse in hiring momentum [1]. This labor market data coincided with a decline in the US Dollar Index (DXY), which dropped to 99.70, revisiting sub-100.00 levels as investors digested both the employment figures and easing geopolitical tensions in the Middle East [1].
Despite this short-term weakness, technical analysis indicates that the Dollar Index remains in a constructive uptrend, trading above key moving averages, with the Relative Strength Index at 59 and the Average Directional Index near 23, pointing to a gradually strengthening but moderate trend [1]. MUFG’s Lee Hardman notes that the US Dollar lost upward momentum after encountering resistance at the 100.00 level, largely due to the retreat in oil prices and reduced Middle East tensions [2]. However, he emphasizes that a hawkish repricing of Federal Reserve rate expectations continues to underpin the Dollar, with the upcoming US CPI report and the June 17 FOMC meeting—where new Fed Chair Kevin Warsh will address the energy price shock—seen as pivotal for future policy direction [2]. Last week’s stronger nonfarm employment report has increased the likelihood that the Fed will at least drop its easing bias at the June meeting [2].
In contrast, the Canadian Dollar (CAD) has been the weakest reserve currency in recent weeks, with USD/CAD returning to 1.39, a level last seen during the equity market pullback in March [3]. Analysts at National Bank Canada attribute this underperformance to Canada’s deteriorating real growth, negative Canada–U.S. 2-year spreads, and a more than 17% decline in gold prices from recent highs [3]. While full-time employment in Canada is at a record high, the persistent outperformance of US growth and unfavorable yield spreads continue to weigh on the loonie [3]. NBC projects that CAD will remain under pressure in the near term, with a year-end USD/CAD target of 1.35, and suggests that a sustained rally would require Ottawa to secure a new trade accord with the US [3].
CONCLUSION
The US Dollar remains supported by hawkish Fed expectations and technical uptrend signals, despite recent labor market softness and easing geopolitical risks. Meanwhile, the Canadian Dollar continues to lag due to weaker growth, negative yield spreads, and falling gold prices, with analysts expecting ongoing pressure unless a new US-Canada trade deal is reached. Market participants are closely watching upcoming US CPI data and the June FOMC meeting for further direction.