During the Asian session on Thursday, the USD/CAD pair retraced its recent losses from the prior session, edging higher to around 1.3730. This upward movement comes as investors anticipate the Federal Reserve’s commitment to maintaining higher interest rates for an extended period, propelling US Treasury yields upwards and bolstering the US Dollar (USD), consequently supporting the USD/CAD pair.
Furthermore, hawkish statements from Fed officials have reinforced the strength of the Greenback. Federal Reserve Bank of Boston President Susan Collins emphasized the necessity for a period of moderation in the US economy to achieve the central bank‘s 2% inflation target, asserting confidence in the alignment of Fed policy with the current economic outlook.
Similarly, Minneapolis Fed President Neel Kashkari indicated on Tuesday that while the likelihood of rate hikes remains minimal, it is not entirely dismissed.
Meanwhile, the potential for a Bank of Canada (BoC) interest rate cut has diminished following the release of better-than-expected Ivey Purchasing Managers Index (PMI) figures for April. The PMI surged to 63.0 from 57.5, surpassing forecasts and marking the ninth consecutive monthly increase, indicating robust sentiment within the private sector. This positive momentum in economic indicators has tempered discussions regarding a potential rate cut by the BoC.
Thursday’s economic calendar for Canada is devoid of major releases, leaving the Canadian Dollar (CAD) vulnerable to broader market movements. However, attention will be on Bank of Canada (BoC) Governor Tiff Macklem’s speech in Ottawa, where he is scheduled to deliver the BoC’s Financial System Review. Macklem’s remarks are anticipated to provide valuable insights into the BoC’s assessment of economic conditions and potential policy implications within the financial sector.
