The US Dollar (USD) maintained its strength against the Canadian Dollar (CAD), with USD/CAD trading around 1.4240 on Thursday, reflecting a modest 0.07% gain on the day [1]. This stability is attributed to elevated US Treasury yields and a series of robust US economic data releases. US Initial Jobless Claims declined to 197,000 for the week ending September 26, down from 198,000 previously and below the expected 201,000, while the four-week moving average also fell to 200,000. Continuing Jobless Claims decreased by 11,000 to 1.701 million [1].
Further supporting the Greenback, the ADP report showed the US private sector added 90,000 jobs in September, surpassing expectations of 70,000 and accelerating from the 36,000 increase in August. Additionally, US second-quarter GDP growth was revised upward to an annualized rate of 2.2% from 1.5% [1]. US manufacturing activity, as measured by the ISM Manufacturing PMI, edged lower to 54.5 in September from 54.6, missing expectations of 55, but underlying components such as the Employment Index (52.7) and New Orders Index (55.3) remained robust. Price pressures intensified, with the Prices Paid Index rising sharply to 77.9 from 71.1 in August [1].
Despite the resilient economic activity and persistent inflationary pressures, expectations for further Federal Reserve (Fed) monetary tightening have eased following softer-than-expected core Personal Consumption Expenditures (PCE) inflation data. Markets now assign a 36% probability of an interest-rate hike at the October 27-28 Fed meeting, according to the CME FedWatch tool [1]. The benchmark 10-year US Treasury yield hovered around 5.32% on Thursday after reaching 5.34%, its highest level since 2002, continuing to support the USD [1].
On the Canadian side, the CAD found limited support from domestic data, as Canada's S&P Global Manufacturing PMI slowed to 51.5 in September from 53 in August, indicating a deceleration in manufacturing expansion [1]. Technical analysis shows USD/CAD holding a constructive bullish bias above key moving averages [1].
CONCLUSION
The US Dollar remains supported by strong economic data and elevated Treasury yields, while the Canadian Dollar is weighed down by slowing domestic manufacturing activity. Market sentiment is cautiously bullish for USD/CAD, with expectations for further Fed tightening tempered by recent inflation data. The overall market impact is medium, as investors continue to monitor both economic indicators and central bank policy signals.