The USD/CAD pair trades on a stronger note near 1.3745 during the early European session on Tuesday. The uptick of the pair is supported by the firmer Greenback and higher US Treasury bond yields. Later in the day, the Canadian S&P Global Manufacturing Purchasing Managers Index (PMI) for June is due, which is estimated to improve to 50.2 from 49.3 in May. Also, Federal Reserve (Fed) Chairman Jerome Powell's speech will be closely watched. 

The weaker-than-expected US ISM Manufacturing PMI for June supported the case that the Fed will cut interest rates in September. Traders are now pricing in nearly 68% odds that the Fed will cut rate in September, up more than 20 percentage points from a month ago, according to the CME FedWatch tool. San Francisco Fed President Mary Daly stated that the US central bank remains data-dependent and didn't give an estimation of a policy path forward. The cautious tone of the Fed officials continues to underpin the US Dollar (USD) in the near term despite a series of weaker US economic data. 

The Bank of Canada (BoC) cut interest rates to 4.75% on June 5, making it the first G7 nation to loosen monetary policy in the current cycle. During the press conference, the BoC governor Tiff Macklem said Canada was in a position to cut rates, but there are limits to how far the BoC can diverge from the Fed, and they are not close to those limits. 

“This is indeed likely to be the first of a series of cuts, although that series is not going to be a straight line down by any means. The Bank's tone is a bit more dovish than expected, but each and every cut this year will require evidence that inflation is calming,” said Douglas Porter, chief economist at BMO Economics.

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