USD/CAD returns to 1.3730 with the Dollar showing a firmer tone

• The US Dollar trims some losses on a mild improvement in sentiment.
• The US Manufacturing PMI adds to evidence of the tariffs' negative impact on the sector.
• Hopes of a hawkish BOC are keeping the CAD buoyed.

The US Dollar is trading on a somewhat stronger note on Tuesday, favoured by an improved market sentiment, which has helped the USD/CAD to bounce from year-to-date lows below 1.3700 and return to 1the 1.3730 area at the moment of writing.

The broader trend, however, remains bearish, with speculative demand for the YS Dollar weak, on concerns about Trump's tariffs' impact on the US economy and looming fears about the US fiscal health.

The Dollar needs strong US data to confirm its recovery

The US ISM Manufacturing PMI figures released on Monday confirmed that trade uncertainty is taking its toll on the sector. The PMI declined for its third consecutive time, against expectations of a slight improvement. The employment and new orders subindexes ticked up, with prices declining and delivery times increasing, and rising concerns about potential shortages in some products.

The figures added pressure on an already weak USDollar, but the Greenback managed to pick up during the Asian session, with market sentiment improving somewhat.

In Canada, the strong Gross Domestic Product figures seen last week have cemented expectations that the Bank of Canada will keep interest rates on hold, which is keeping the Canadian dollar's dips limited.

The focus today will be on the US Factory Orders release, of particular interest after Monday's weak manufacturing data, and the US JOLTS Job Openings. The US Dollar needs positive surprises to extend its recovery.