USD/CAD recovers from early weakness on Thursday after the release of US PMI data beats estimates in May. The Services PMI beat which may be critical to interest-rate expectations given the sector was singled out as an inflation hotspot by the Fed. The Bank of Canada is expected to cut interest rates in either June or July –the Fed not till September at the earliest. USD/CAD is trading in the 1.
The maintenance of higher interest rates supports the USD since it attracts higher inflows of foreign capital compared to lower interest rates. USD/CAD had been trading significantly down for the day prior to the data on the back of a mixture of higher Crude Oil prices , positive risk appetite , better-than-expected Canadian Housing data and technical chart resistance. Following the data, however, it made up a substantial portion of its earlier losses.
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