USD/CAD eases from 1 1/2-week high, focus on Fed and BoC

The USD/CAD currency pair eased from a 1 1/2-week high of 1.3741 on Monday ahead of the outcome of the Federal Reserve’s and the Bank of Canada’s policy meetings.

The Fed is largely expected to leave its federal funds rate target range intact at 3.50%-3.75% at its March 17th-18th meeting, following three successive rate cuts last year.

In January, FOMC policy makers highlighted that economic activity had been expanding at a solid pace, job growth had remained slow, while inflation had remained somewhat elevated.

The minutes from the Federal Reserve’s January meeting showed that FOMC officials were divided over the future trajectory of interest rates. Several policy makers signaled that further rate cuts would likely be appropriate in case inflation continued to subside in line with their projections.

Others said that it might be prudent to keep the policy rate on hold for some time. Some FOMC members even argued that rate hikes could become necessary in case inflation remained elevated.

Investors will also be paying close attention to the press conference with Fed Chair Jerome Powell for clues over the timing of future interest rate cuts as well as to the new set of FOMC economic forecasts.

Meanwhile, the Bank of Canada is expected to keep its benchmark interest rate intact at 2.25% at its March 18th policy meeting.

Policy makers had said the current stance was appropriate given the BoC’s baseline economic outlook.

Yet, recent tariff threats from the US brought back concerns of trade disruptions and prompted the Governing Council to warn of uncertainty, potentially warranting a monetary policy adjustment in either direction.

In its quarterly monetary policy report, the central bank maintained its forecast for modest growth this year and in 2027, while inflation is expected to hover around the 2% target.

The USD/CAD currency pair was last down 0.10% on the day to trade at 1.3707.