Ella 
In Asia on Thursday, USD/CAD recovered from the previous day’s losses and moved higher to around 1.3730. Investors’ expectations that the Federal Reserve will keep interest rates higher for longer have pushed up U.S. Treasury yields. This provided support to the US dollar (USD), boosting USD/CAD.
In addition, hawkish comments from Federal Reserve officials also supported the dollar. According to Reuters, Boston Federal Reserve President Susan Collins said on Wednesday that the U.S. economy needs a period of moderation to achieve the central bank’s 2% inflation target. Collins stressed that to achieve this, demand needs to slow. She expressed confidence that Fed policy is consistent with the current economic outlook.
On Tuesday, Minneapolis Fed President Neel Kashkari said the current expectation is that interest rates will remain stable for quite some time. Although the possibility of a rate hike is slim, it is not completely ruled out.
Meanwhile, prospects for a rate cut from the Bank of Canada (BoC) eased following higher-than-expected Ivey Purchasing Managers Index (PMI) data. Canada’s seasonally adjusted Ivey Purchasing Managers’ Index surged to 63.0 in April from 57.5, beating expectations of 58.1. This marked the ninth consecutive month of growth in Canada’s manufacturing sector and reached its highest level in two years, indicating strong private sector sentiment. As a result, economic data pointed to a strong Canadian economy and talk of a possible rate cut by the Bank of Canada eased.
There are no important Canadian data releases on Thursday, so the Canadian dollar (CAD) is vulnerable to overall market movements. However, Bank of Canada (BOC) Governor Tiff Macklem will deliver a speech in Ottawa to release the Bank of Canada Financial System Review. The report provides a comprehensive assessment of the development of the financial system and analyzes the direction of financial sector policies. Marklem’s speech may give the market an idea of the Bank of Canada’s views on economic conditions and potential policy tendencies.
