USD/CAD JUMPS TO NEAR 1.3600 AS US DOLLAR RECOVERS, FED POWELL’S SPEECH EYED

USD/CAD climbs to near 1.3600 as the US Dollar resumes its upside journey.

Investors await the Fed Powell’s speech and US Manufacturing PMI data.

Global slowdown risks elevated further as Caixin Manufacturing PMI failed to match expectations.

The USD/CAD pair moves vertically to near the round-level resistance of 1.3600 in the late European session. The Loonie asset strengthens as the US Dollar concludes its correction and resumes its upside journey to near fresh 11-month high around 106.80.

S&P500 futures added some losses in the London session, portraying further strengthening of the risk-off theme. US equities are expected to remain cautious despite US government managing to ditch a government shutdown in a last-minute deal. The agreement between the US House and Senate approved a funding bill until November 17.

Meanwhile, investors await the speech from Federal Reserve (Fed) chair Jerome Powell, which will shape expectations about the interest rate outlook. As per the CME Fedwatch tool, investors price in that interest rates will remain steady at 5.25%-5.50% at the November monetary policy. Meanwhile, chances for interest rates remaining unchanged at 5.25%-5.50% until the end of 2023 dropped to 56%.

Apart from that, the focus will be on the US Institute of Supply Management (ISM) Manufacturing PMI, which will be published at 14:00 GMT. The US factory activities are expected to remain below the 50.0 threshold as US firms are operating at a lower capacity due to a deteriorating demand environment. The economic data is seen nominally by 10 basis points (bps) to 47.7.

The US Dollar Index (DXY) climbs above 106.50 after concluding the correcting move as the market mood remains downbeat. The global slowdown risks elevated further as Caixin Manufacturing's PMI failed to match expectations.

On the Canadian Dollar front, investors await the employment data for September, which will be released later this week. The economic data will shape upcoming monetary policy meetings.