USD/CAD ticks higher around 1.3820 despite USD Index gains sharply

• USD/CAD rises marginally while the USD Index gains almost 0.5% above 100.00.
• The US Dollar surges despite the US ISM Manufacturing PMI contracts at a faster pace in April.
• The BoC believes that the impact of previous interest rate cuts have yet not been transmitted into the economy.

The USD/CAD pair edges higher to near 1.3820 during North American trading hours on Thursday. The Loonie pair moves slightly higher despite the US Dollar (USD) has attracted significant bids after the release of the United States (US) ISM Manufacturing Purchasing Managers' Index (PMI) data.

The US Dollar Index (DXY) is up almost 0.5% above 100.00 despite the agency reported that activities in the manufacturing sector continued to decline at a faster pace. The Manufacturing PMI came in at 48.7, lower than the March reading of 49.0, but higher than estimates of 48.0. A figure below the 50.0 threshold indicates contraction in economic activities.

The outlook of the US Dollar is already grim amid uncertainty over trade relations between the US and China. The comments from the White House have indicated that both the nations have not started trade discussions yet.

US Trade Representative Jamieson Greer stated in an interview with Fox News on Wednesday that trade discussions with Beijing have not initiated yet since the imposition of reciprocal tariffs, South China Morning Post (SCMP) reported

In the Canadian region, investors seek fresh cues about whether the Bank of Canada (BoC) will start reducing interest rates again from the policy meeting in June. The BoC minutes for the April meeting showed on Wednesday that the central bank left interest rates unchanged at 2.75% amid uncertainty over the economic outlook in the face of additional tariffs announced by US President Donald Trump on April 2. This was the first time when the BoC kept borrowing rates on hold after reducing them for seven times in a row.

The BoC minutes also indicated that policymakers still believe that the impact of previous rate cuts is yet to be feed into the economy and therefore policy easing at this stage could have been a "premature" move.

The minutes also stated that the central bank would remain flexible towards monetary policy adjustments until "medium- to long-term inflation expectations remained anchored", Reuters reported.