Ella 
In early Asian trading on Thursday, USD/CAD continued its gains and was below the mid-1.3500 level. The Bank of Canada (BOC) held its benchmark interest rate steady at 5.0% on Wednesday, marking the fourth consecutive time the central bank has held steady. Focus will turn to Thursday’s preliminary estimate of U.S. fourth-quarter (Q4) gross domestic product (GDP) growth. As of press time, USD/CAD was trading at 1.3532, with an intraday increase of 0.03%.
The Bank of Canada kept overnight interest rates steady for the fourth consecutive time, extending a pause that began last July after the financial crisis in Las Vegas. Bank of Canada Governor Tiff Macklem said on Wednesday the central bank’s focus has shifted from whether interest rates are high enough to when they can start to fall. The Bank of Canada’s Monetary Policy Report (MPR) stated that the Bank expects Canadian inflation to achieve its 2% target by 2025.
The U.S. S&P Global Composite Purchasing Managers’ Index (PMI) for January showed business activity rose at the fastest pace since June 2023, at 52.3, compared with the previous reading of 50.9, beating market expectations. Meanwhile, the services PMI rose to 52.9 in January from 51.4 in December. The manufacturing index rose to 50.3 from 47.9 in the previous reading. The stronger-than-expected purchasing managers’ index indicated that the U.S. economy is experiencing a soft landing.
On Tuesday, former St. Louis Federal Reserve (Fed) President James Bullard said that even if inflation does not reach its 2% target, the Fed may start cutting interest rates as soon as March. Atlanta Fed President Raphael Bostic said he believes rate cuts will begin in the third quarter.
