The weakness of the greenback provides an opportunity for the Canadian dollar to soar higher ahead of the release of Canadian jobs data that will give an indication of the outlook for central bank policy.
In the Asian session, the loonie dollar traded strong at a 3 -and -a -half -year high after soaring 1%, to around 1.21600 against the US dollar.
The dollar index continued to trade weaker against most major currencies after the Federal Reserve (Fed) continued to insist it would stick to its current policy easing despite rising inflation.
In contrast to the statement the Central Bank of Canada (BOC) has begun tightening policy by reducing its weekly government bond purchases following the prospects for stronger economic growth.
Meanwhile, the surge in commodity prices also helped drive the strengthening of the loonie dollar, particularly aluminum which surged to a 3 -year high and gold to a 3 -month high.
The publication of Canadian and U.S. employment data tonight became the main focus of the market. Unlike the U.S., Canada is expected to record a decline in employment reports in April due to closure measures implemented to curb the spread of Covid-19.
The Canadian dollar has a chance to rise if the actual reading can beat market expectations, and if jobs decline, it may not be too lower than projected for a decline of 175,000.
