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The USD/CAD pair surged past the 1.3600 mark amidst rising US bond yields and US political uncertainty. The US economy displayed recovery signs with lower-than-expected jobless claims and an upwardly revised Q1 GDP, while the Fed hints at a pause in rate hikes. On the Canadian front, Manufacturing Sales declined by 0.2% in April, highlighting the economic contrast between the US and Canada.
The USD/CAD pair reclaimed the 1.3600 figure after hitting a daily low of 1.3586, climbing for two consecutive days and is trading at 1.624 at the time of writing, toward the April 28 swing high at 1.3667.
US House Speaker Kevin McCarthy said that both sides made some progress but there are still outstanding issues. US Treasury bond yields were at 3.789%, its highest level since the SVB collapse on March 10. US Treasury Secretary Janet Yellen continued her campaign putting pressure on the US Congress, stating the US would run out of cash by June 1.
Fitch Rating has warned that the US AAA rating is under threat due to the political drama in Washington. This has caused the US Dollar Index (DXY) to gain 0.36% and the USD/CAD to climb on a strong US Dollar (USD) and weaker oil prices.
US economic data shows the economy regaining momentum, with the Initial Jobless Claims for the week ending on May 20 expanding by 229K and the second estimate of the US Gross Domestic Product (GDP) for Q1 revised from 1.1% to 1.3%.
FOMC minutes showed that the US central bank is open to pause rates at the upcoming meetings, though emphasized that some flexibility is needed in the case of needing higher rates. Participants commented that the current monetary policy is impacting the economy as bank credit tightened, and that no rate cuts are expected in 2023.
