- The USD/CAD pair dipped to around 1.3905 during early Asian trading on Friday.
- Unexpected results from the US S&P Global Manufacturing PMI for August were released.
- A rebound in crude oil prices is expected to bolster the commodity-linked CAD.
On Friday morning in Asia, the USD/CAD currency pair halted a three-day winning streak, falling to close to 1.3905. The recovery in crude oil prices is helping support the currency pair linked to commodities. Market participants are particularly focused on an important speech by Federal Reserve Chair Jerome Powell at the upcoming Jackson Hole Symposium.
A preliminary report showed an uptick in U.S. business activity for August, with the S&P Global PMI index coming in at 55.1, up from 54.7. Manufacturing data also improved, rising to 53.3 from 49.8 in July, while the Services PMI eased slightly to 55.4 from 55.7—still above the anticipated 54.2.
Despite these positive PMI reports, the dollar hasn’t seen much support as traders continue to anticipate possible interest rate cuts from the Federal Reserve in their September meeting. The CME FedWatch tool indicates a 74% chance of an interest rate reduction next month, a slight decrease from 82% earlier in the week, adjusting the expected cut from 54 basis points to 49 basis points.
Additionally, the rise in crude oil prices is favorably affecting the CAD, given Canada’s role as the largest oil exporter to the U.S. Higher oil prices usually strengthen the CAD.
There’s a growing belief that the Bank of Canada will cut rates in their next policy decision in September, especially following the recent Consumer Price Index data. This perspective may weigh on the Canadian dollar and create momentum for the USD/CAD pair.
