USD/CAD struggles to hold above 1.3500 amid weak US ADP Employment

• USD/CAD sees downside below 1.3500 as weak US ADP private payrolls data sent the US Dollar inside the woods.
• Fresh private payrolls surprisingly come in lower at 99K than estimates of 145K.
• The BoC is expected to soften its interest rate policy further.

The USD/CAD pair faces pressures in holding the psychological support of 1.3500 in Thursday’s New York session. The Loonie asset senses selling pressure as the United States (US) Automatic Data Processing (ADP) Employment has surprisingly come in weaker-than-expected.

The agency reported that there were 99K fresh payrolls in the private sector in August. Investors anticipated that private employers hired 145K job-seekers, higher than July’s reading of 111K, downwardly revised from 122K. This has deepened fears of deteriorating labor market conditions and has prompted expectations that the Federal Reserve (Fed) will begin reducing interest rates aggressively this month.

Surging Fed large rate cut bets have weighed heavily on the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slumps to near 101.00.

Going forward, investors will focus on the US ISM Services PMI data for August, which will be published at 14:00 GMT.

Meanwhile, the Canadian Dollar (CAD) remains under pressure as market participants see the Bank of Canada (BoC) continuing its policy-easing spell further. The BoC reduced its interest rates by 25 basis points (bps) to 4.25% on Wednesday. This was the third straight interest rate cut announcement of 25 bps by the BoC. Analysts at ING said in a note on Wednesday, “We essentially see the BoC cutting rates 25 bps at each meeting until next summer, by which time the policy rate is expected to be down at 3%.”

Going forward, the Canadian Dollar will be influenced by the labor market data for August, which will be published on Friday. The employment report is expected to show that Canadian employers hired fresh 26.5K job-seekers after laying off 2.8K workers in July. The Unemployment Rate is seen rising further to 6.5% from the former release of 6.4%.