The Canadian Dollar (CAD) edged lower on Friday, pressured by declining global oil prices and softer US jobs data, which contributed to a rise in the USD/CAD pair by 0.13% to near 1.4200 at the time of writing [1]. The US economy added only 57K Nonfarm Payrolls (NFP) in June, significantly below the expected 110K, and the previous month's figure was revised down to 129K from 172K. This weaker employment report led investors to scale back expectations for further Federal Reserve tightening, with the probability of a September rate hike dropping to 53% from 63% prior to the data release, while the odds for a December hike remained at 76.8% [1].
Despite the pressure on the US Dollar, the Canadian Dollar remained weak due to lower oil prices, which negatively impact Canada's terms-of-trade advantage and reinforce expectations that the Bank of Canada (BoC) may maintain a dovish policy stance if disinflation persists [1]. Domestic data offered limited support, with Canada's S&P Global Manufacturing PMI inching up to 53 in June from 52.9 in May, indicating modest manufacturing expansion. Wells Fargo economists noted that Canada's labor market is soft but stabilizing, with employment growth below 1% year-over-year and gains focused in full-time jobs. They expect these conditions to support the BoC in keeping interest rates on hold for the foreseeable future [1].
Currency heat maps from both articles show that the Canadian Dollar was the weakest among major currencies on the day, particularly against the Euro, which was the strongest versus the CAD [1][2]. The Euro's strength was attributed to a modest recovery after recent declines, supported by Eurozone PMI data and a reduction in expectations for further European Central Bank (ECB) rate hikes following softer inflation data [2]. The Harmonized Index of Consumer Prices (HICP) in the Eurozone eased to 2.8% year-over-year in June from 3.2% in May, and Core HICP slowed to 2.4% from 2.6%. ECB Governing Council member Emmanuel Moulin stated, "We're in a good position," and emphasized that the ECB has not signaled a new hiking cycle [2].
Deutsche Bank reported that the probability of another ECB rate hike by September has fallen below 50%, with the odds of a December hike at around 70% [2]. Meanwhile, the Eurozone Composite PMI rose to 50.0 in June from 48.5 in May, while the UK Composite PMI fell to 49.3 from 49.7, remaining below the 50.0 threshold for the second consecutive month [2]. These developments reinforced the Euro's outperformance against the Canadian Dollar, as reflected in the daily currency heat maps [1][2].
CONCLUSION
The Canadian Dollar faced notable weakness due to falling oil prices and subdued domestic data, while the Euro gained ground, particularly against the CAD, amid shifting central bank expectations and improving Eurozone PMI figures. Market sentiment remains cautious, with investors awaiting further employment data from Canada and closely monitoring central bank policy signals. The overall market impact is medium, as currency movements reflect evolving macroeconomic and monetary policy dynamics.