At1.2676, USD/CAD is higher by 0.17% and has travelled from a low of 1.2652 to score a corrective high of 1.2681, reversing some of the greenback's weakness from the start of the week. The US dollar was out of favour on Monday and it was on course for its first monthly drop in five months as investors have scaled back bets that rising US rates will spur further gains.
However, in recent trade, the greenback has firmed on rising US yields and end of month flows. Looking forward, however, the week ahead is full of data that could provide clues on the outlook for global growth as well as US interest rates. At the top of the hour, we get Chinese Purchasing Managers' Index figures, then the focus will turn to the Nonfarm Payrolls data on Friday.
''Employment likely continued to advance firmly in May but at a more moderate pace after consecutive job gains at +428k in March and April,'' analysts at TD Securities said. ''Employment in the household survey likely rebounded after printing negative in April. We expect this to lead to a drop in the unemployment rate to a post-COVID low of 3.5%. We also look for wage growth to remain steady at 0.3% m/m (5.2% YoY).''
Meanwhile, domestically, the Canadian dollar climbed to its highest level in more than five-weeks against the greenback on Monday, as data showed Canada's current account surplus turning positive. Traders are also expecting that there will be an interest rate hike this week by the Bank of Canada.
In the data, Canada's current account surplus was C$5.0 billion in the first quarter, swinging from a revised C$137 million deficit in the fourth quarter. It was the widest surplus since the second quarter of 2008.
Looking forward to today in North America, traders will be keeping an eye out for the Gross Domestic Product data. The number could help guide expectations for the Bank of Canada policy outlook. Money markets expect the central bank to raise its benchmark rate by half a percentage point yet again on Wednesday.
''We look for the Bank to deliver another 50bp hike in June to bring the overnight rate to 1.50%,'' analysts at TD Securities said. ''With little uncertainty around the decision itself, the focus will shift to the policy statement where we expect a hawkish tone. The Bank will note that growth and inflation are both tracking above the April MPR, and repeat that rates will need to rise further.''
Meanwhile, The price of oil, one of Canada's major exports, was higher overnight as China eased COVID-19 restrictions and rose again in early Asian trade on Tuesday after European Union leaders said they had agreed to cut 90% of oil imports from Russia by the end of this year.
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