USD/CAD Regains Recent Losses Near the Mid-1.3400s as US PMI Data Approaches

During Thursday's early Asian trading hours, the USD/CAD pair regains some lost ground below the mid-1.3400 areas. As a result of Federal Reserve (Fed) Chairman Jerome Powell ruling out the possibility of a rate reduction at the March meeting, the USD gains strength following the widely anticipated decision to maintain interest rates. The USD/CAD is currently trading at 1.3435, a daily loss of 0.05%.

As anticipated by market participants, the Federal Reserve's Open Market Committee (FOMC) maintained interest rates between 5.25% and 5.50% for the fourth consecutive meeting in January. Powell stated that a rate reduction in March is improbable. The markets anticipate that at its May meeting, the Federal Reserve will likely begin normalizing policy. Short-term support for the US Dollar (USD) is provided by the postponement of the rate reduction; this creates a tailwind for the USD/CAD pair.

The US ADP employment report for January revealed 107K private sector job additions, down from the previous estimate of 158K and below the market consensus of 145K, as of Wednesday. In contrast, after increasing 1.1% QoQ in the prior quarter, the Employment Cost Index increased 0.9% QoQ in the fourth quarter, which was below expectations of 1.0%.

Preliminary data released by Statistics Canada on Wednesday indicates that the Gross Domestic Product (GDP) of Canada experienced a 0.3% expansion in December. This corresponds to an annualized growth rate of 1.2% for the fourth quarter. During the third quarter, the Gross Domestic Product (GDP) of Canada declined by 1.1%. The favorable data implies that the Bank of Canada (BoC) could potentially maintain interest rates unchanged until the latter part of the calendar year. Options for an April rate reduction were reduced from 51% prior to the publication of GDP growth figures to 42% among investors.

Investors are expected to closely monitor the ISM Manufacturing PMI and US weekly Initial Jobless Claims on Thursday. It is anticipated that the Manufacturing PMI will decrease from 47.4 in December to 47.0 in January. US Nonfarm Payrolls will be the subject of attention on Friday. Traders will identify trading opportunities in the USD/CAD exchange by analyzing the data.