USD/CAD approaches 1.3630 despite BoC denies for rate cuts this year, US GDP in focus

• USD/CAD is marching towards 1.3630 as the USD Index has resumed its upside journey.
• Overall market mood is full of caution as investors are shifting their focus toward the US GDP (Q1) data.
• The BoC won’t hesitate in hiking interest rates further if needed to arrest the sticky inflation.

The USD/CAD pair is marching towards the crucial resistance of 1.3630 in the Asian session. The Loonie asset is driving higher after a volatility contraction move as the US Dollar Index (DXY) is looking to conclude its nominal correction. The USD Index dropped marginally to near 101.40 after a V-Shape recovery influenced by volatility in S&P500.

S&P500 futures are showing some decent gains in the Asian session. The 500-US stock basket acted as a mixed bag as technology stocks were exclusively in demand while First Republic Bank dived further. Investors saw a loss of confidence in the United States administration after the First Republic Bank stated that the administration was reluctant to provide investment support amid deteriorating deposits by customers.

Overall market mood is full of caution as investors are shifting their focus toward the US Gross Domestic Product (GDP) (Q1) data. The annualized GDP is seen at 2.0% lower than the former release of 2.6%. A decline in consumer spending, higher interest rates by the Federal Reserve (Fed), and tight credit conditions by US commercial banks could have a negative impact on economic growth.

The release of the Bank of Canada's (BoC) Summary of Deliberations showed that the Canadian economy is a little stronger than anticipated earlier. Also, the tight labor market is not consistent with the agenda of bringing stubborn inflation to 2%. Therefore, BoC Governor Tiff Macklem won’t hesitate in hiking interest rates further if needed to arrest the sticky inflation. BoC’s minutes confirmed that rate cuts are not expected this year.