USD/CAD attempts a rebound to near 1.3100, BOC policy and US ISM Services PMI in focus

• USD/CAD has displayed a pullback move after printing a low of 1.3100.
• The BOC is expected to hike its interest rates by 75 bps to 3.25%.
• Weaker estimates for the US ISM Services PMI have turned the DXY volatile.

The USD/CAD pair has picked bids around the immediate support of 1.3100 after displaying a meaningful decline in the Asian session. A rebound attempt in the asset is highly needed to be on the watchlist as it could be a short-lived pullback. The asset is expected to remain volatile as investors are awaiting the release of the US ISM Services PMI after an extended weekend in the US markets.

As per the forecasts, the Services PMI will land at 55.5, lower than the prior release of 56.7. The corporate sector has postponed investment in potential opportunities and expansion plans led by the unavailability of cheap funds due to higher interest rates by the Federal Reserve (Fed). The consequences of higher interest rates have impacted economic activities, which are trimming PMI numbers dramatically.

On the loonie front, investors are awaiting the announcement of the interest rate decision by the Bank of Canada (BOC). BOC Governor Tiff Macklem is expected to escalate the interest rates by 75 basis points (bps). Earlier, the BOC announced a fill percentage rate hike to combat runaway inflation. Price pressures in the Canadian economy have displayed signs of exhaustion. To be noted, the Canadian Consumer Price Index (CPI) was last recorded at 7.6% for July vs. 8.1% print recorded for June.

Meanwhile, the oil prices have retraced after a decent upside move. The black gold is expected to extend gains as OPEC has announced production cuts to fix the recent decline in oil prices. It is worth noting that Canada is a leading exporter of oil to the US and higher oil prices will accelerate dollar inflows.