USD/CAD steadies above 1.2100, looks to post strong daily gains
- USD/CAD rose sharply during the American trading hours.
- US Dollar Index clings to daily gains around 90.50.
- Surging US T-bond yields and upbeat data boost USD on Thursday.
The USD/CAD pair gained traction during the American trading hours and climbed to its highest level in nearly a week at 1.2120 before going into a consolidation phase. As of writing, the pair was up 0.65% on the day at 1.2111.
USD's market valuation drives USD/CAD movements
The renewed USD strength became the main market theme in the second half of the day on Thursday. The upbeat data releases from the US and surging US Treasury bond yields provided a boost to the greenback and the US Dollar Index (DXY) reached its strongest level in nearly three weeks at 90.55. At the moment, the DXY is up 0.7% at 90.53.
The data published by the Automatic Data Processing (ADP) Research Institute showed on Thursday that the private sector employment in the US rose by 978,000 in May, surpassing the market expectation of 650,000 by a wide margin. Additionally, the weekly Initial Jobless Claims declined to 385,000 from 405,000.
Furthermore, the Markit Services PMI and the ISM Services PMI both notched new series highs for May at 70.4 and 64, respectively. More importantly, these publications highlighted increasing price pressures at a robust pace and revived inflation concerns. Consequently, the benchmark 10-year US Treasury bond yield is up more than 2% on a daily basis.
Commenting on the Services PMI report, "unprecedented output and price growth rates will inevitably lead to speculation about an earlier than previously expected tapering of Fed policy," said Chris Williamson, Chief Business Economist at IHS Markit.
Technical levels to watch for