USD/CAD extends its upside above 1.3600 ahead of BoC rate decision

• USD/CAD extends the rally to 1.3600 amid the rebound of USD. 
• BoC is expected to keep rates steady at 5% for the fifth time in a row. 
• The US ISM Services PMI came in at 52.6 in February vs. 53.4 prior, weaker than the expectation of 53.0.

 The USD/CAD pair edges higher to nearly 1.3600 during the early Asian trading hours on Wednesday. The Bank of Canada (BoC) will announce the interest rate decision later in the day, with no rate change expected. The pair currently trades near 1.3598, adding 0.03% on the day. 

The BoC will release its Monetary Policy Statement on Wednesday, and markets expect the Canadian central bank to keep rates steady at 5% for the fifth time in a row. Financial markets see just a 19% odds of a surprise rate cut on Wednesday at its March Italee policy meeting. Traders will take core cues from the press conference about the economic and inflation outlook.

On the USD’s front, Federal Reserve (Fed) Chair Powell’s testimony to the Senate Banking Committee on Wednesday will be a closely watched event. The dovish tone from Fed officials might exert some selling pressure on the Greenback and create a headwind for the USD/CAD pair. 

About the data, the US February ISM Services PMI declined to 52.6 from 53.4 in January, below the market consensus of 53.0. The New Orders Index improved to 56.1 from 55.0 in the previous reading. The Employment Index dropped to 48.0 versus 50.5 prior, and the Prices Paid Index declined to 58.6 from 64.0 in the previous reading. 

Moving on, traders will watch the BoC interest rate decision and the Fed Chair Powell’s testimony on Wednesday. The attention will shift to US labor market data on Friday. The US Nonfarm Payrolls is estimated to add 200,000 jobs in February, while the Unemployment Rate is forecast unchanged at 3.7%.