Anna 
During the European session on Friday, the USD/CAD pair paused its four-day winning streak, hovering around 1.3720. The US Dollar (USD) saw an initial uptick against the Canadian Dollar (CAD) in the Asian market hours, driven by risk aversion sentiment. This shift could be attributed to the release of higher-than-expected Purchasing Managers Index (PMI) data from the United States (US) on Thursday. The data reinforced a hawkish sentiment surrounding the Federal Reserve (Fed), suggesting the maintenance of higher policy rates for an extended period.
Key Highlights:
US PMI Data: The S&P Global US Composite PMI for May rose to 54.4 from April’s 51.3, surpassing market expectations. The Service PMI surged to 54.8, indicating significant output growth, while the Manufacturing PMI increased to 50.9.
FOMC Minutes and Fed Comments: The latest Federal Open Market Committee (FOMC) Minutes revealed concerns about persistent inflation, with Federal Reserve Bank of Atlanta President Raphael Bostic stating that the inflation outlook might not improve as quickly as anticipated by markets.
Impact on USD/CAD: Declining crude oil prices, coupled with expectations of delayed Fed rate cuts, have exerted selling pressure on the commodity-linked Canadian Dollar (CAD). The prolonged fall in West Texas Intermediate (WTI) Oil prices, trading around $77.80 per barrel, has contributed to this pressure.
Economic Indicators: Investors are eyeing Retail Sales data from Canada and US Durable Goods Orders, along with the Michigan Consumer Sentiment Index, to gauge economic conditions in both countries.
Market Outlook:
Expectations of a potential Bank of Canada (BoC) interest rate cut before the US Federal Reserve, combined with concerns over reduced oil demand due to higher US interest rates, may continue to support the USD/CAD pair. However, market participants remain vigilant for further economic data releases and central bank statements, which could influence future movements in the currency pair.
