The USD/CAD pair continues to climb, reaching the key resistance level of 1.3700 as the US Dollar rebounds, following a recent low near 105.40. Market sentiment remains positive as investors anticipate interest rate cuts by the Federal Reserve starting in September. The US Dollar Index (DXY) shows improvement, nearing 105.75, with 10-year US Treasury yields rising to around 4.45%.
The likelihood of Fed rate cuts in September was reinforced by weaker US core Personal Consumption Expenditure Price Index (PCE) data for May, with annual core PCE growth slowing to 2.6% from the previous 2.8%. Investors are eagerly awaiting the US ISM Manufacturing PMI report for June, expected to show improved output in the manufacturing sector.
On the other hand, the Canadian Dollar weakened despite higher-than-expected inflation data for May, leading to reduced expectations of further rate cuts by the Bank of Canada (BoC), which initiated rate cuts in June. The upcoming ISM Manufacturing PMI report is a key indicator of business activity in the US manufacturing sector, influencing market sentiment towards the US Dollar.