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USD / CAD - Canadian dollar rally rests

- Bank of Canada meeting on Wednesday.

- Markets continue to assess Fed Powell’s comments.

- US dollar bounces off Friday’s lows.

USDCAD: open 1.3542-46, overnight range 1.3480-1.3556, close 1.3498, WTI $73.46, Gold, $2068.47

The Canadian dollar rallied hard on Friday thanks to higher than expected domestic employment gains and comments by Fed Chair Jerome Powell.

Canada gained 24,900 jobs in November (forecast 15,500) with the gain driven by full-time jobs. However economists suggest that the report is further evidence that the slowing labour market points to weaker economic growth.

However the news took a back seat to developments south of the border. Thursday’s marked easing in the US Core-PCE price index raised hopes that the Fed would soon be cutting rates. The Fed Chair Jerome Powell entered the fray. His speech at Spellman College in Atlanta sounded rather hawkish. It wasn’t. Economists parsed the text and concluded that Mr Powell’s comments were far less assertive than in the past. The Fed president said they would raise rates again “if it becomes appropriate.” The economists interpreted that comment to mean It isn’t appropriate to raise rates now.” Word games, for sure, but the result was a steep sell-off in the US dollar, free-falling 10year Treasury yields and soaring stock markets. Gold traders heartily embraced the “rates have peaked” scenario and XAUSUD rose to $2148.78, a new record high.

EURUSD fell from 1.0913 to 1.0829 on Friday, then stabilized in a 1.0850-1.0895 range until the NY open. The pair found some support as Sentix Economic Index data indicated rising expectations in the eurozone for the third consecutive time. ECB Governing Council member Joachim Nagel, warned that the battle against inflation isn't over yet, hinting that geopolitical tensions could further fuel inflation. His statement stands in contrast to Bank of France Governor Francois Villeroy’s assertion that the ECB's tightening phase has ended, with possible rate reductions considered for 2024.

GBPUSD chopped within a 1.2656-1.2725 range, gaining modest support against EUR amid forecasts of earlier ECB rate cuts compared to the Bank of England. UK data scarcity this week leaves its direction heavily influenced by the US dollar's performance.

USDJPY saw a decline from 148.27 to 146.23, as market participants moved away from long USDJPY positions, anticipating the Fed's initial rate decrease on May 1.

AUDUSD hovered within its 0.6634-0.6691 bracket. The RBA is predicted to maintain rates at 4.35% in its upcoming decision but could issue a hawkish statement.

US factory orders are expected to have fallen 2.6% in October, a downturn from September's 2.8% increase.