The USD/CAD currency pair extended the gains from the prior two trading days on Wednesday, while moving within a relatively narrow daily range, ahead of the outcome of the Federal Reserve’s and the Bank of Canada’s policy meetings.
The Fed is widely expected to leave its federal funds rate target range intact at 4.25%-4.50% at its January 28th-29th meeting. It would be the first pause in the monetary easing cycle, which was initiated in September.
Investors will be paying close attention to the press conference with Fed Chair Jerome Powell and the Fed’s inflation outlook for clues over the timing of any future interest rate cuts.
Meanwhile, the Bank of Canada is expected to lower its benchmark interest rate by 25 basis points to 3.00% at its January policy meeting.
Following the sizeable 50bp rate cut in December, rhetoric from BoC policy makers suggested there would likely not be any more aggressive rate reductions in 2025.
The 50 bp cut came after data showed that the Canadian economy had grown at an annualized rate of 1% in the third quarter, or below the BoC’s forecast. Fourth-quarter GDP growth may also fall short of projections.
The USD/CAD currency pair was last edging up 0.15% on the day to trade at 1.4415.
The US Dollar has been supported in the wake of fresh US tariff threats.
US President Trump announced on Monday plans to impose tariffs on imported computer chips, pharmaceuticals and steel in an attempt to encourage domestic production. Trump has also proposed potential 25% duties on imports from Canada and Mexico on February 1st.
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