03 Dec 2024

USD/CAD remains stable at approximately 1.4045 during the early Asian session on Tuesday.

The US ISM Manufacturing PMI increased to 48.4 in November, compared to the previous figure of 46.5.

Meanwhile, the Canadian Manufacturing PMI reached a 21-month peak in November.

The USD/CAD currency pair is currently trading within a stable range around 1.4045 during the early hours of the Asian session on Tuesday. This stability comes amid a backdrop of potential economic shifts, particularly with the looming threat of increased tariffs from former President Donald Trump, which could significantly impact trade relations between the United States and Canada. Additionally, a resurgence in demand for the US Dollar (USD) may provide some support to the pair, as investors react to various economic indicators and geopolitical developments.

Later today, market participants will be closely watching the release of the US Job Openings and Labor Turnover Survey (JOLTs) data for October. This report is crucial as it provides insights into the health of the labor market, which is a key factor influencing the Federal Reserve's monetary policy decisions. Furthermore, Federal Reserve officials Adriana Kugler and Austan Goolsbee are scheduled to deliver remarks, which could offer additional context on the Fed's outlook and future interest rate decisions.

Recent economic data published on Monday revealed an improvement in the US ISM Manufacturing Purchasing Managers' Index (PMI), which rose to 48.4 in November, up from 46.5 in October. This increase not only surpassed market expectations of 47.5 but also indicates a potential stabilization in the manufacturing sector, which has been under pressure. In response to this positive economic news, the Greenback has experienced a slight uptick, reflecting increased investor confidence in the US economy.

Moreover, the Federal Reserve's cautious approach to monetary policy may further bolster the USD. Fed officials clarified on Monday that they expect the central bank to continue lowering interest rates over the coming year. However, they stopped short of committing to a rate cut in the upcoming December meeting. According to the CME FedWatch Tool, market participants have assigned a nearly 76.0% probability to a quarter-point rate cut in December, while there remains a 24.0% chance that the policy rate will remain unchanged. This uncertainty surrounding future rate cuts could lead to fluctuations in the USD as traders react to new information.

On the Canadian side, the S&P Global Manufacturing PMI for Canada exceeded expectations in November, climbing to 52.0 from 51.1 in October. This marks its highest level since February 2023 and surpasses the market consensus of 50.8, indicating a robust performance in the Canadian manufacturing sector. However, despite this positive data, the Canadian Dollar (CAD) may face downward pressure due to President-elect Donald Trump's tariff threats. His proposed 25