Canadian Dollar steadies as robust US jobs data counter rising oil prices

The USD/CAD pair maintained a flat trading range near 1.3835 in the early European session on Monday. Stronger-than-expected US jobs data helped offset the upward pressure from rising crude oil prices. US markets were closed on Monday for Labour Day. The US Nonfarm Payrolls (NFP) reported a gain of 162,000 jobs in August, surpassing expectations, while the Unemployment Rate remained stable during the same period, according to the US Bureau of Labor Statistics (BLS).

Market expectations for a Federal Reserve (Fed) rate hike at the September policy meeting intensified following the US jobs data, with Fed funds futures now pricing in a 60% chance of a hike. Canada's economy, however, saw a drop of 41,700 jobs in August, with the unemployment rate staying unchanged at 6.4%, according to Statistics Canada.

This decline in employment and a slowdown in wage growth dampened expectations of a decisive economic turnaround, according to Thomas Ryan, a senior North American economist at Capital Economics. Escalating geopolitical tensions in the Middle East could further push up crude oil prices, potentially benefiting the commodity-linked Canadian Dollar (CAD).

Analysts at Scotiabank noted that the immediate direction of the CAD will depend on the upcoming US labor market data, suggesting a potential modest upward movement if the figures align with expectations.