- ISM Non-Manufacturing PMI beats expectations, boosts USD.
- BoC’s Schembri says current degree of monetary policy stimulus remains appropriate.
- WTI climbs to highest level since early August after weekly EIA report.
The USD/CAD pair dipped below the 1.32 mark earlier in the session but staged a decisive rebound during the American trading hours supported by the broad USD strength. After touching a session high of 1.3246 in the last hour, however, the pair started to erase its gains and was last seen trading at 1.3230, adding only 0.07% on a daily basis.
The data published by the Institue for Supply Management (ISM) showed that the service sector activity grew at a stronger pace than expected in August to ease concerns over a recession in the US. With the initial market reaction, the 10-year US Treasury Bond yield shot higher and added as much as 8% while the US Dollar Index erased its daily losses and turned flat on the day near 98.40.
The ISM’s Non-Manufacturing PMI rose to 56.4 in August from 53.7. Furthermore, the monthly Automatic Data Processing (ADP) report revealed that employment in the private sector in the US increased by 195,000 to beat the market expectation of 149,000.
Oil rally and BoC commentary support CAD
On the other hand, the upbeat market sentiment also provided a boost to crude oil prices to allow the Loonie to limit its losses. Additionally, the Energy Information Administration reported a larger-than-expected draw in the US crude oil stocks in its weekly publication to fuel the crude oil rally. The barrel of West Texas Intermediate was last seen trading at $57.22, adding 2.25% on the day.
Moreover, Bank of Canada Deputy Governor Lawrence Schembri in a prepared speech today said that the current degree of monetary policy stimulus was still appropriate and refrained from hinting at a possible rate cut, putting weight on the pair’s shoulders. “Biggest downside risk remains trade war between US and China given Canada’s reliance on international trade; escalating tariffs and uncertainty reducing global trade more than forecast,” Schembri stated.
Technical levels to watch for
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