USD/CAD rebounds to near 1.3750 due to hawkish Fed officials

• USD/CAD edges higher after the hawkish remarks from the Fed officials.
• The higher US Treasury yields are supporting the US Dollar.
• BoC interest rate cut has moderated after Canadian business confidence reached a two-year high.

USD/CAD retraces its recent losses registered in the previous session, trading higher around 1.3730 during the Asian session on Thursday. Investor expectation of the Federal Reserve’s (Fed) maintaining higher interest rates for longer has pushed the US Treasury yields higher. This has contributed support for the US Dollar (USD), underpinning the USD/CAD pair.

Additionally, hawkish remarks from the Fed officials have bolstered the Greenback. According to a Reuters report, Federal Reserve Bank of Boston President Susan Collins said on Wednesday that a need for a period of moderation in the US economy to achieve the central bank's 2% inflation target. Collins highlighted that demand will need to ease in order to reach this goal. She expressed confidence that Fed policy is well-aligned with the current economic outlook.

On Tuesday, Minneapolis Fed President Neel Kashkari said that the prevailing expectation is for rates to stay steady for a considerable duration. Although the likelihood of rate hikes is minimal, it's not entirely ruled out.

Meanwhile, the case for a Bank of Canada (BoC) interest rate cut has moderated following the release of higher-than-expected Ivey Purchasing Managers Index (PMI) figures. Canada's seasonally-adjusted Ivey PMI for April surged to 63.0 from 57.5, surpassing the forecast of 58.1. This marked the ninth consecutive monthly increase, hitting its highest level in two years, indicating robust sentiment within the private sector. As a result, discussions regarding a potential rate cut by the Bank of Canada have moderated, reflecting the positive momentum in economic indicators.

Thursday's data docket lacks any releases related to Canada, leaving the Canadian Dollar (CAD) susceptible to broader market movements. However, Bank of Canada (BoC) Governor Tiff Macklem is scheduled to speak in Ottawa, delivering the BoC's Financial System Review. This report offers a comprehensive evaluation of financial system developments and an analysis of policy directions within the financial sector. Macklem's remarks may provide insights into the BoC's perspective on economic conditions and potential policy implications.