European PMI Aids the Euro in Overcoming a Bearish Retracement

The US Dollar faced a broad decline against major currencies on Wednesday, driven by positive developments in European economic indicators and uncertainties surrounding the upcoming US PMI release. The initial shift occurred with the release of German and European PMI numbers, indicating improvements in various sectors, albeit remaining in contraction territory.Euro Gains Ground on Upbeat German PMI:German Purchase Manager Index figures propelled the Euro higher against the US Dollar, with German Manufacturing rising from 43.3 to 45.4. French Manufacturing also delivered an optimistic surprise, climbing from 44.4 to 46.6. These positive data points contributed to a boost in European indices, with all major markets showing gains of over 1%. The upward jump of EURUSD coincided with the release of PMI data, which hints that the data managed to surprise investors and was the cause of buying:US Economic Indicators and Equity Markets:Contrasting with the positive European data, the US Mortgage Applications, as reported by the Mortgage Bankers Association, came in at 3.7%, a significant drop from the previous week's 10.4%. A potential further contraction in US PMI numbers later in the day could spell trouble for the US Dollar.UK Economic Activity Accelerates:In the UK, private sector economic activity continued to expand at an accelerating pace in January, with the S&P Global Composite PMI rising to 52.5 from 52.1 in December, surpassing the market consensus of 52.2. S&P Global Manufacturing PMI edged higher to 47.3 from 46.2, while the Services PMI advanced to 53.8 from 53.4.Currency Pairs in Focus: GBP/USD and USD/CADThe GBP/USD gathered bullish momentum on the back of the upbeat PMI readings, rising 0.6% on the day to 1.2760.On the other hand, the USD/CAD faced challenges in capitalizing on intraday gains ahead of Canada's interest rate decision. The pair extended its losing streak, trading near 1.3450 during the European session inside the pullback channel after testing 1.35. It is worth noting that a major resistance slope line has been broken in the pair, after which a corrective channel ensued, which creates an opportunity to bet on the extension of the rally upon completion of the pullback:The decline in crude oil prices could exert pressure on the Canadian Dollar, limiting the losses of the USD/CAD pair.Bank of Canada's Expected Hold:The Canadian Dollar receives upward support amid expectations that the Bank of Canada will maintain its policy rate during its first meeting of the year. This would mark the fourth consecutive time the BoC kept the interest rate at 5.0%. The anticipation for a steady policy is reinforced by December's inflation figures, which reveal an unexpected increase of 3.4% in consumer prices over the last twelve months.