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• USD/CAD weakens to around 1.3905 in Friday’s early Asian session.
• Flash US S&P Global Manufacturing PMI surprises to the upside in August. 
• A recovery in crude oil prices lifts the commodity-linked Loonie.

The USD/CAD pair loses traction to near 1.3905, snapping the three-day winning streak during the early Asian session on Friday. A rebound in crude oil prices provides some support to the commodity-linked Loonie. All eyes will be on the key speech by Federal Reserve (Fed) Chair Jerome Powell at the Jackson Hole Symposium later on Friday.

The preliminary reading on S&P Global’s Composite PMI showed on Thursday that US business activity picked up pace in August, with the index at 55.4 versus 55.1 prior. Meanwhile, the US Manufacturing PMI rose to 53.3 in August from 49.8 in July, above the market consensus of 49.5. Services PMI eased to 55.4 in August from 55.7 in the previous reading, but was stronger than the 54.2 expected. 

The upbeat US S&P Global PMI reports fail to boost the Greenback as traders continue to price in a rate cut in the Fed’s September meeting. According to the CME FedWatch tool, Fed funds futures traders are now pricing in a 74% chance of a rate reduction next month, down from 82% on Wednesday. They are also pricing in 49 basis points (bps) of cuts by year-end, down from 54 bps.

Meanwhile, a recovery in crude oil prices underpins the commodity-linked Loonie. It’s worth noting that Canada is the largest oil exporter to the US, and higher crude oil prices tend to have a positive impact on the CAD value.

On the other hand, traders ramp up their bets that the Bank of Canada (BoC) would deliver a rate reduction at the next policy decision in September after Canadian Consumer Price Index (CPI) inflation data. This, in turn, could weigh on the Canadian Dollar and create a tailwind for the pair. 

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