• Canadian Dollar bounces up with the US Dollar retreating on downbeat US data.
• US service sector activity decelerated against expectations with Prices Paid printing lowest level in years.
• Strong US ADP and hawkish comments from Fed’s Bostic have failed to support USD.

The Canadian Dollar (CAD) is trading higher on Wednesday, retracing the previous two days’ losses. The Loonie is favored by the US Dollar's knee-jerk reaction following downbeat US services activity data.

The US ISM Services PMI missed market expectations in March, with the Prices Paid sub-index showing a significant slowdown. This has eased investors' fears of a strong economy that would prompt the Federal Reserve (Fed) to dial down its monetary easing plans, which have pushed US Treasury yields and the US Dollar lower.

The downbeat services data has offset the larger-than-expected increase in the ADP Employment Report, which opens the doors for a bright Nonfarm Payrolls reading on Friday that might restore confidence in the US Dollar.

Beyond that, the increasing geopolitical tensions and growing concerns about tighter supply have pushed crude prices to a fresh year-to-date (YTD) high. This is providing additional support to the commodity-linked CAD.