The USD/CAD pair sustains Monday’s rebound and trades near 1.4010 during Tuesday’s Asian session. The Loonie pair recovered at the start of the week as the US Dollar (USD) picked up some strength, even as weak US ISM Manufacturing PMI data for November reinforced expectations of another Federal Reserve (Fed) rate cut this year.
The US Dollar Index (DXY) is steady near 99.40 after briefly revisiting the monthly low around 99.00 on Monday.
Fed expectations support USD
The ISM report showed the Manufacturing PMI falling more sharply to 48.2 in November, compared with expectations of 48.6 and the prior reading of 48.7. This marks the ninth consecutive month of sub-50 readings, signaling continued contraction in the sector.
According to the CME FedWatch Tool, markets now assign an 86.5% probability of a 25 bps Fed rate cut in December, bringing the target range to 3.50%-3.75%.
Key US data ahead
Traders will look to Wednesday’s ADP Employment Change and ISM Services PMI for fresh direction, with both releases carrying potential for short-term USD volatility.
CAD awaits critical jobs data
The Canadian Dollar (CAD) is likely to remain range-bound ahead of Friday’s November employment report. Labor market conditions will play a key role in shaping expectations for the Bank of Canada’s (BoC) next policy steps.
Economists forecast a rise in Canada’s unemployment rate to 7.0% from 6.9% in October, while the labor force is expected to remain stable.
