The USD/CAD pair moved higher during the Asian session on Tuesday, rebounding from a one-week low near 1.4275 touched the previous day. Spot prices climbed above the 1.4300 level, though upside momentum remains limited as traders exercise caution ahead of key economic events.
The US Dollar (USD) is attempting a modest recovery from its lowest level since October 2024, driven by repositioning ahead of this week’s central bank meetings. However, the Greenback’s gains remain capped as markets increasingly expect the Federal Reserve (Fed) to implement multiple interest rate cuts this year.
Meanwhile, crude oil prices continue to hover near a two-week high amid persistent geopolitical tensions in the Middle East, raising concerns about potential supply disruptions. Higher oil prices generally support the commodity-linked Canadian Dollar (CAD), limiting USD/CAD’s upside potential. Additionally, positive developments in US-Canada trade talks last week may further bolster the Loonie.
With the Federal Open Market Committee (FOMC) decision set for Wednesday, traders are likely to remain cautious. Before that, market participants will closely watch Canada’s latest consumer inflation data on Tuesday, which could influence expectations for the Bank of Canada’s policy stance. In addition, second-tier US economic data may provide short-term direction for the USD/CAD pair.
For now, traders remain on edge, balancing USD recovery attempts against the supportive fundamentals for the CAD.
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