USD/CAD holds steady above 1.3800, BoC cuts rate again in July

• USD/CAD trades on a flat note around 1.3805 in Thursday’s early Asian session.
• The BoC decided to cut the key interest rate to 4.5% at its July meeting on Wednesday, as widely expected. 
• The flash US manufacturing sector saw a decline in July, while services business activity Index hit a 28-month high. 

The USD/CAD pair trades flat near 1.3805 during the early Asian section on Thursday. The downside of the pair might be capped after the Bank of Canada (BoC) reduces its key borrowing rates again on Wednesday, which drags the Canadian Dollar (CAD) lower.  On Thursday, investors will keep an eye on the advanced Gross Domestic Product (GDP) for the second quarter, followed by Durable Goods Orders and weekly Initial Jobless Claims.

The Canadian central bank cut its benchmark interest rate by 25 basis points (bps) to 4.5% on Wednesday, as widely expected by the markets. The BoC governor Tiff Macklem said during the press conference that it would be reasonable to expect further rate cuts if inflation continues to ease in line with the forecast. Financial markets expect one more 25 bps rate cut this year, with a nearly 53% odds that the BoC will cut rates again in its September meeting. 

Meanwhile, the extended losses in crude oil prices might continue to undermine the Loonie. Lower oil prices generally weigh on the Canadian Dollar as Canada is the leading exporter of Oil to the United States (US). 

On the other hand, mixed US S&P Purchasing Managers Index (PMI) for July and dovish comments from the Federal Reserve (Fed) are likely to exert some selling pressure on the Greenback. 

Data released on Wednesday showed that the US S&P Global Composite PMI improved to 55.0 in July from 54.8 in June. Additionally, the S&P Global Manufacturing PMI dropped to 49.5 from 51.6 in the same period, weaker than the 51.7 expected. Finally, the Services PMI rose to 56.0 from 55.3.