During the Asian session on Monday, USD/CAD halted its six-day decline, stabilizing around 1.3700. The pair received support from a stronger US Dollar (USD) following upbeat US economic indicators, particularly the Purchasing Managers Index (PMI).
The US Composite PMI for June exceeded expectations, climbing to 54.6 from May’s 54.5, reaching its highest level since April 2022. The Manufacturing PMI rose to 51.7 from 51.3, surpassing forecasts of 51.0, while the Services PMI increased to 55.1 from 54.8, beating expectations of 53.7. These results bolstered the USD, contributing to the USD/CAD pair’s upward movement.
The US Dollar Index (DXY), which measures the USD against major currencies, edged higher as Federal Reserve (Fed) officials indicated a delay in potential interest rate cuts. Fed Bank of Minneapolis President Neel Kashkari suggested it could take one to two years to bring inflation back to the target of 2%, influencing market expectations.
Investors, as per the CME FedWatch Tool, adjusted expectations with a 65.9% probability priced in for a Fed rate cut in September, down from 70.2% a week earlier.
Conversely, the Canadian Dollar (CAD) found support from rising crude oil prices, which mitigated downside pressure. Geopolitical tensions, including Israeli military actions in Gaza and Ukrainian drone strikes on Russian refineries, continued to disrupt oil supply, bolstering prices.
Overall, the USD/CAD pair’s movements were influenced by robust US economic data and geopolitical developments impacting oil markets, setting the tone for trading in the upcoming sessions.
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