USD/CAD RECOVERS ITS RECENT LOSSES BELOW THE MID-1.3400S, US PMI DATA LOOMS

• USD/CAD gains ground near 1.3435 on the rebound In US Dollar. 
• The FOMC kept rates on hold at 5.25%–5.50% at its January meeting on Wednesday, as widely expected. 
• Canada's Gross Domestic Product (GDP) expanded by 0.3% in December, implying an annualized growth rate of 1.2% in Q4.
• Investors await the US weekly Initial Jobless Claims and ISM Manufacturing PMI ahead of the Nonfarm Payrolls on Friday.

The USD/CAD pair recovers some lost ground below the mid-1.3400s during the early Asian trading hours on Thursday. The US Dollar (USD) gathers strength in response to Federal Reserve (Fed) Chairman Jerome Powell closing the door to a potential rate cut in the March meeting after the widely expected decision to leave rates unchanged. At press time, USD/CAD is trading at 1.3435, losing 0.05% on the day. 

The Federal Reserve's Open Market Committee (FOMC) kept rates on hold at 5.25%–5.50% for a fourth consecutive meeting in January, as widely expected by market participants. Powell suggested that a March rate cut is unlikely. The markets believe the Fed is likely to start easing policy at its May meeting. The delay of the rate cut provides some support to the US Dollar (USD) in the near term, which acts as a tailwind for the USD/CAD pair. 

On Wednesday, the US ADP employment report showed the private sector added 107K jobs in January from the previous reading of 158K, lower than the market consensus of 145K. Meanwhile, the Employment Cost Index rose 0.9% QoQ in Q4 from the previous quarter's 1.1% QoQ gain, worse than the expectation of 1.0%.

According to a preliminary estimate from Statistics Canada on Wednesday, Canada's Gross Domestic Product (GDP) expanded by 0.3% in December, implying an annualized growth rate of 1.2% in Q4. In the third quarter, Canada's GDP number contracted by 1.1%. The upbeat data suggests that the Bank of Canada (BoC) might be able to hold rates steady until closer to the middle of the year. Investors pared bets for an April rate cut to 42% odds from 51% before the GDP growth numbers were released. 

Investors will keep an eye on the US weekly Initial Jobless Claims and ISM Manufacturing PMI on Thursday. The Manufacturing PMI is estimated to decline from 47.4 in December to 47.0 in January. On Friday, US Nonfarm Payrolls will be in the spotlight. Traders will take cues from the data and find trading opportunities around the USD/CAD pair.