The USD/CAD currency pair hovered just above a 21-week low of 1.3697 on Tuesday, as the greenback was weighed down by expectations of further policy easing by the Federal Reserve.
The latest US macro data pointed to moderating inflation and a cooling labor market, giving the Fed more scope to lower rates.
FOMC policy makers signaled just one 25 bps rate cut for next year, while investors continue to expect two rate cuts of 25 basis points each.
Market players now await the second estimate of US GDP growth for Q3, due later today, for more guidance on economic health and the Fed’s monetary easing trajectory.
Meanwhile, CAD traders will be paying close attention to the minutes from the Bank of Canada’s December policy meeting.
The Bank of Canada kept its benchmark interest rate intact at 2.25% at its December 10th policy meeting, in line with market consensus.
The BoC Governing Council said it viewed the current policy rate about right to keep inflation near 2%, while supporting the economy through this period of structural adjustment.
Additionally, the Canadian Dollar, which is closely tied to commodity performance, has received a boost from higher Oil prices.
Crude prices have surged amid rising concerns about possible supply disruptions. Tensions between the US and Venezuela have intensified after the US reportedly moved against another vessel near Venezuelan waters following the seizure of two oil tankers this month.
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