Ella 
USD/CAD fell modestly to around 1.3625 in early European trading on Monday. The weak dollar supported the decline in USD/CAD after the release of the US personal consumption expenditures (PCE) price index. Investors will get more signals from the Canadian S&P Global Manufacturing Purchasing Managers Index and the US ISM Manufacturing Purchasing Managers Index for May, which will be released later on Monday.
U.S. inflation remained stable in April, which prompted market expectations that the Federal Reserve (Fed) will cut interest rates later this year and weighed on the dollar. Data released by the U.S. Department of Commerce last Friday showed that the U.S. PCE price index rose 0.3% month-on-month in April, the same as the unrevised increase in March. Meanwhile, the core PCE price index, which excludes the more volatile food and energy, recorded a monthly rate of 0.2% in April, compared with a 0.3% increase in March. The core PCE price index climbed 2.8% year-on-year for the third consecutive month. Currently, market expectations for a Fed rate cut in September have risen to 53% from 49% before the inflation report was released.
As for the Canadian dollar, Canada’s weak first quarter GDP triggered the Bank of Canada (BOC) to cut interest rates for the first time on Wednesday. Canada’s annualized economic growth rate was 1.7%, lower than the expected value of 2.2% and the Bank of Canada’s forecast of 2.8%. In addition to the downward trend in GDP, which weighed on the Canadian dollar, the decline in crude oil prices put pressure on the Canadian dollar as Canada is the largest oil exporter to the United States.
