The USD/CAD currency pair staged a sharp recovery after dipping near the key support level of 1.3600 on Wednesday. This rebound came despite earlier weakness in the US Dollar due to softer-than-expected US inflation data.
Key Drivers:
- Soft US Inflation: US CPI data for April showed a decline in line with estimates, potentially paving the way for a dovish Federal Reserve stance.
- Canadian Manufacturing Sales Slump: Weak Canadian Manufacturing Sales data for March weighed on the Loonie (Canadian Dollar).
- Risk Appetite Rebound: Improved investor sentiment following the inflation data led to a rise in the S&P 500 and a decline in US Treasury yields.
USD/CAD Price Action:
- Initial Drop: The USD/CAD pair faced selling pressure initially due to the weak US inflation data.
- Sharp Reversal: However, the pair recovered sharply after Canadian Manufacturing Sales data disappointed expectations.
Looking Ahead:
- USD Outlook: The US Dollar’s future direction remains uncertain. While inflation data might lead to a dovish Fed, the overall sentiment could influence its strength.
- CAD Outlook: The performance of the Loonie will depend on upcoming economic data releases and global market conditions.
