FX.co ★ Canadian Dollar Eases from Multi-Month High

The Canadian dollar has retreated past 1.39 against the US dollar, slipping from its peak levels of 1.378 reached in early May. This decline is attributed to modest labor market indicators, evolving expectations regarding central bank policies, and ongoing trade tensions affecting the currency. Although April's employment report indicated a net gain of 7,400 jobs, exceeding projections, the unemployment rate increased to 6.9%, marking its highest level since November. This situation highlights vulnerability within sectors exposed to tariffs, particularly manufacturing. Market projections now suggest a more than 50% chance of an interest rate cut in June, following the Bank of Canada's Financial System Review, which highlighted concerns about elevated household debt and significant hedge-fund activities in bond auctions. Concurrently, the Federal Reserve's decision to maintain interest rates at 4.25–4.50% and its cautious approach to persistent inflation and labor market challenges have propelled US assets. Furthermore, President Trump's announcement of a trade agreement with the UK, along with indications of reduced tariffs on Chinese imports, has strengthened the US dollar.