USD/CAD Holds Near Highs as Markets Await Key Employment Reports

The USD/CAD currency pair held near its highs on Friday as markets remained cautious ahead of closely watched employment reports from both the United States and Canada. Investors are keeping a close eye on labor market data, which is expected to influence central bank expectations.

The US Dollar continued to benefit from safe-haven demand due to geopolitical tensions in the Middle East, with uncertainty surrounding the Strait of Hormuz remaining a key concern. Elevated US Treasury yields also supported the greenback as investors reassessed the likelihood of a prolonged restrictive monetary policy by the Federal Reserve.

Ahead of the release of July's Nonfarm Payrolls report, markets are expecting an addition of 80,000 new jobs in the United States after June's increase of 57,000. The unemployment rate is forecast to remain unchanged at 4.2%, while annual wage growth is expected to hold steady at 3.5%. A stronger or weaker-than-expected report could significantly influence expectations for future Fed policy.

In Canada, higher crude oil prices are providing underlying support for the Canadian Dollar, given Canada's status as a major energy exporter. However, ongoing US Dollar resilience has left the currency pair close to recent highs. Canada's July employment report will also be released alongside the US payroll data, with market forecasts pointing to an increase of 15,000 jobs.