USD/CAD drifts higher to near 1.3500 amid geopolitical risks

• USD/CAD trades stronger to around 1.3495 in Wednesday's early Asian session.
• The US ISM Manufacturing PMI remains unchanged in September.
• Higher crude oil prices provide some support to the Loonie.

The USD/CAD pair trades with mild gains near 1.3495 during the early Asian session on Wednesday. The escalating geopolitical tensions in the Middle East boost the safe-haven currency like the US Dollar (USD).

Data released by the Institute for Supply Management (ISM) on Tuesday showed that the US Manufacturing Purchasing Managers Index (PMI) came in at 47.2 in September versus 47.2 prior, below the market consensus of 47.5. This figure was below the 50% threshold for the sixth consecutive month.

The US Federal Reserve (Fed) Chair, Jerome Powell, stated that more rate cuts are likely as the economy remains on solid ground, yet he cautioned against rapid changes. Atlanta Fed President Raphael Bostic said on Monday that he would be open to another half-percentage-point interest rate cut at the November meeting if upcoming data show job growth slowing faster than expected.

The US ADP Employment Change data will be in the spotlight later on Wednesday. Also, the US Federal Reserve (Fed) Thomas Barkin, Raphael Bostic, Beth Hammack, Alberto Musalem, and Michelle Bowman are set to speak.

On the other hand, crude oil prices rise after Iran launches rockets at Israel in a direct attack, raising fear of supply disruptions in the region. This, in turn, boosts the commodity-linked Canadian Dollar (CAD) against the Greenback. Iran launched over 200 ballistic missiles at Israel on Tuesday. This action was a reprisal after Israel carried out a dramatic series of attacks on Lebanon in recent days, killing Hezbollah leader Hassan Nasrallah in a Beirut airstrike and sending ground forces across the border, per Bloomberg.