USD/CAD trades with modest losses below 1.3650, eyes on Canadian/US PMI data

The USD/CAD pair trades with a mild bearish bias around 1.3625 during the early European session on Monday. The downtick of the pair is backed by the weaker US Dollar (USD) after the release of the US Personal Consumption Expenditures (PCE) Price Index. Investors will take more cues from the Canadian S&P Global Manufacturing PMI and US ISM Manufacturing PMI for May, which are due later on Monday. 

The US inflation remained steady in April, prompting the expectation that the Federal Reserve (Fed) will cut interest rates later in the year and drag the Greenback lower. The Commerce Department showed on Friday that the US PCE increased 0.3% MoM in April, matching the unrevised gain in March. Meanwhile, the Core PCE, excluding the volatile food and energy, rose 0.2% MoM in April, compared to a 0.3% gain in March. On an annual basis, the core PCE price index climbed 2.8% for the third consecutive month. The markets are now pricing in nearly a 53% odds of Fed rate cut in September, up from 49% before the inflation report.

On the Loonie front, the weaker Canadian Gross Domestic Product (GDP) for the first quarter triggered the first interest rate cut by the Bank of Canada (BoC) on Wednesday. The Canadian economy expanded at an annualized rate of 1.7%, missing the estimation of 2.2% expansion and the central bank's 2.8% forecast. Apart from the downbeat GDP data that weighs on the Canadian Dollar (CAD). The CAD is pressured by the decline of crude oil prices as Canada is the largest oil exporter to the United States.