USD/CAD rises above 1.3500 on upbeat safe-haven appeal, US Services PMI eyed

• USD/CAD rallies above 1.3500 as downbeat market sentiment improves safe-haven appeal.
• The US ISM Services PMI is seen increasing to 52.0 from 50.6 in December.
• Investors await the timing of when the BoC will start reducing interest rates.

The USD/CAD pair has climbed above the psychological resistance of 1.3500 in the early New York session. The Loonie asset has witnessed stellar interest as an appeal for safe-haven assets has significantly improved due to fading expectations of a rate cut by the Federal Reserve (Fed) in March.

Considering negative overnight futures, the S&P500 is expected to open on a bearish note. The US Dollar Index (DXY) has rallied above 104.40 as the market sentiment is downbeat. 10-year US Treasury yields have soared 4.085%.

Investors see the Fed reducing interest rates from May as fears of persistent price pressures have deepened due to robust labor demand and wage growth. Also, Fed policymakers have been arguing in favor of restrictive interest rates for somewhat longer to achieve confidence that inflation will return to the 2% target sustainably.

On Friday, Fed Governor Michelle Bowman warned that premature rate cuts could delay the decline in price pressures toward the 2% target, forcing policymakers to raise interest rates again.

Meanwhile, investors await the US Institute of Supply Management (ISM) Services PMI for January, which will be published at 15:00 GMT. Investors anticipate that the Services PMI was up to 52.0 from 50.6 in December.

On the Canadian Dollar front, investors await the speech from Bank of Canada (BoC) Governor Tiff Macklem, which is scheduled for Tuesday. Tiff Macklem is expected to provide fresh guidance on interest rates. Investors want to know when the BoC plans to cut down interest rates this year.