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USD/CAD drops sharply to 1.3370

The USD/CAD pair has dropped to near Thursday’s low around 1.3367 in the European session on Friday. The Loonie asset faces selling pressure as the US Dollar Index (DXY) has dropped sharply ahead of the United States Nonfarm Payrolls (NFP) data for January, which will be published at 13:30 GMT. As per the estimates, US employers recruited 180K workers, which is lower than the former reading of 216K. The Unemployment Rate is seen increasing slightly to 3.8% from 3.7% in December.

A major focus will be on the Average Hourly Earnings data, which will set a fresh undertone for inflation. Monthly wage growth is seen rising moderately by 0.3% against 0.4% increase in December. The annual Average Hourly Earnings is expected to rise at a steady pace of 4.1%. S&P500 futures have generated significant gains in the London session, indicating a significant improvement in the risk appetite of the market participants. The USD Index has tested territory below the crucial support of 103.00. The USD Index has come under pressure as investors hope that rate cuts from the Federal Reserve (Fed) are imminent amid easing price pressures. However, Fed officials are avoiding speculation about the timing of rate cuts as they are not convinced that inflation will sustainably return to the 2% target. On the Canadian Dollar front, Manufacturing PMI rose sharply to 48.3 in January against 45.4 despite the Bank of Canada (BoC) holding interest rates at 5%.