Ella 
USD/CAD regained some ground below 1.3450 during early Asian trade on Thursday. The U.S. dollar (USD) strengthened after Federal Reserve (Fed) Chairman Jerome Powell closed the possibility of a rate cut at the March meeting following the widely expected decision to keep interest rates unchanged. As of press time, the U.S. dollar was trading at 1.3435 against the Canadian dollar, down 0.05% on the day.
The Federal Open Market Committee (FOMC) kept interest rates unchanged for the fourth consecutive time at 5.25%-5.50% at its January meeting, which was widely expected by market participants. Powell signaled a rate cut in March was unlikely. Markets believe the Fed is likely to begin easing policy at its May meeting. The postponement of the rate cut has provided some support for the US dollar (USD) in the short-term, which has had a tailwind effect on the USD/CAD pair.
On Wednesday, the U.S. ADP employment report showed that the private sector added 107,000 jobs in January, compared with the previous value of 158,000, which was lower than the market consensus of 145,000. At the same time, the employment cost index increased by 0.9% in the fourth quarter from the previous quarter, lower than the 1.0% expected value of 1.1% in the previous quarter.
Canada’s gross domestic product (GDP) rose 0.3 per cent in December from the previous month, implying an annualized rate of 1.2 per cent in the fourth quarter, Statistics Canada’s preliminary estimate on Wednesday showed. Canada’s gross domestic product (GDP) contracted 1.1% in the third quarter. Upbeat data suggests the Bank of Canada (BOC) may keep interest rates steady until closer to mid-year. Ahead of the GDP growth data, investors lowered their bets on a rate cut in April from 51% to 42%.
Investors will pay close attention to the number of U.S. initial jobless claims and the ISM Manufacturing Purchasing Managers Index released on Thursday. The manufacturing PMI is expected to fall to 47.0 in January from 47.4 in December. On Friday, U.S. non-farm payrolls data will be in focus. Traders will look for USD/CAD trading opportunities from this data.
