USD/CAD Reaches 1.3730 Amid 5-Day Uptrend

USD/CAD Reaches 1.3730 Amid 5-Day Uptrend

Key Points:

  • USD/CAD reached 1.3730, marking a five-day consecutive rise.
  • Strong US PMI data, with Composite PMI at 54.4, bolstered the USD.

The USD/CAD trading pair has been experiencing notable activity, reaching a trading level of 1.3730. This marks the pair’s fifth consecutive day of upward movement, with significant trading occurring during the Asian trading hours on Friday. The consistent rise in the USD/CAD pair is attributed to various economic factors and market expectations influencing the currency dynamics between the USD and Canadian dollar.

US PMI Surpasses Expectations, Impacts USD/CAD

The primary driver for the stronger USD is the positive US PMI data, which has surpassed market expectations. Additionally, the market is closely watching the upcoming Canadian Retail Sales data, US Durable Goods Orders data, and a speech by the Fed’s Waller, all of which are expected to impact future trading levels of the USD/CAD pair.

US Services PMI Hits 54.8 in May, Supports USD

S&P Global said the Flash US Composite PMI for May was 54.4. This marks a notable rise from April’s 51.3. Additionally, it surpassed market expectations. The Manufacturing PMI for May reached 50.9, up from 50.0 in April, aligning with the market consensus 50.0. The Services PMI rose to 54.8 in May, compared to 51.3 in April, exceeding market expectations. Upbeat PMI figures boosted the US dollar, pushing the USD Index above 105.00, creating a positive tailwind for USD/CAD.

53% Chance of BoC Rate Cut in June Weighs on CAD

Due to declining crude oil prices, the Canadian dollar has been under selling pressure. As Canada is the largest oil exporter to the US, lower oil prices adversely impact the CAD. Additionally, expectations of potential interest rate cuts by the Bank of Canada (BoC) are weighing heavily on the CAD. Market analysts indicate a 53% chance of 25 basis points cut in June, with a rate cut fully priced for July, further contributing to the CAD’s depreciation against the USD.

Strong US PMI and Weak CAD Widen USD/CAD Gap

The robust US PMI data has fortified the US dollar, making it more appealing to investors. Conversely, the Canadian dollar’s weakness due to declining oil prices and potential BoC rate cuts has widened the USD/CAD trading gap. The interplay between these economic indicators and market expectations will continue to drive the pair’s performance in the coming days.

In summary, the USD/CAD ppair’srecent trading level of 1.3730 during the Asian trading session on Friday reflects the combined influence of strong US economic data and weaker Canadian dollar fundamentals. Traders should stay vigilant as upcoming economic releases and central bank statements will likely dictate the USD/CAD pair’s direction.