Canadian Dollar underperforms as job market deteriorates, inflation data eyed

The Canadian Dollar (CAD) underperforms its major currency peers and trades flat against the US Dollar (USD) at around 1.3720 in the early European trade on Monday. The CAD faces selling pressure as the labor market data for February showed that employers fired workers again.

The data showed on Friday that 83.9K payrolls were out of work, while the economy was expected to have created 10K new jobs. In January, employers laid off 24.8K workers. The Unemployment Rate jumped to 6.7% against 6.6% estimates and the prior reading of 6.5%.

Signs of weakening labor demand are expected to prompt expectations of an interest rate cut by the Bank of Canada (BoC) in the near term.

In Monday’s session, investors will focus on Canada’s Consumer Price Index (CPI) data for February, which will be published at 12:30 GMT.

Going forward, the downside in the Canadian Dollar is expected to remain limited amid higher oil prices due to the closure of the Strait of Hormuz. A sharp increase in the oil price results in higher foreign inflows in the Canadian economy, given that the nation is the largest exporter of oil to the United States (US).

Meanwhile, US President Donald Trump has expressed confidence that Washington will jointly intervene with some nations to reopen the Strait of Hormuz, a passage through which 20% of global oil is supplied, which has been seized by the Iranian military as part of retaliation against the US, and. Israel.