USD/CAD retreats below 1.4000 as strong Canada jobs data boost the Loonie

• The Canadian Dollar strengthens after Canada's job growth sharply beats forecasts.
• Canada adds 60.4K jobs in September, far above the 5K expected, while the Unemployment Rate holds steady at 7.1%, its highest since August 2021.
• BoC October interest rate cut odds drop to 57% from 72% pre-data.

The Canadian Dollar (CAD) gains traction against the US Dollar (USD) on Friday, snapping a three-day losing streak after upbeat employment figures boosted investor confidence and helped offset recent Greenback strength.

At the time of writing, USD/CAD trades near 1.3990, down about 0.20%, easing from Thursday's six-month peak around 1.4030 following the release of Canada's September Labour Force Survey.

Statistics Canada reported that Employment rose by 60.4K in September, sharply beating the market consensus of +5K and reversing August's 65.5K drop. The Unemployment Rate remained unchanged at 7.1%, beating expectations for a rise to 7.2%, while Average Hourly Wages grew 3.6% YoY, matching August's pace.

While wage growth remains moderate, the improvement in labour market conditions reduces the urgency for the Bank of Canada (BoC) to cut rates further this month. According to swap market data, traders now price a 57% probability of an October rate cut, down from around 72% before the jobs release. However, markets still fully expect a 25-basis-point (bps) reduction in interest rates by year-end.

Meanwhile, West Texas Intermediate (WTI) Crude Oil extends losses on Friday, slipping below the $60.00 mark and hovering near a four-month low, down more than 2% on the day. The decline in Oil prices could limit further gains for the Loonie, given Canada's status as a major crude exporter.

The Loonie also draws some support as the Greenback's rally cools, with the US Dollar Index (DXY) trading slightly weaker around 99.35. Despite holding near two-month highs, the index appears to be consolidating after a strong week and remains on track for its biggest weekly advance of the year.