The USD/CAD pair is trading slightly higher, around 1.4195, during the late American session on Tuesday. This positive movement is largely driven by hawkish comments from Federal Reserve (Fed) officials, supporting the US Dollar (USD). Market participants are awaiting the release of the FOMC Minutes on Wednesday, which could offer more insights into the Fed’s monetary policy stance.
Canadian CPI Data Influences Market Expectations
Data from Statistics Canada released on Tuesday showed a 1.9% year-on-year (YoY) rise in Canada’s Consumer Price Index (CPI) for January, slightly up from 1.8% in December, matching analyst expectations. On a monthly basis, CPI rose by 0.1%, an improvement from the -0.4% change in December. Furthermore, the Bank of Canada’s Core CPI, which excludes volatile food and energy prices, increased to 2.1% YoY in January from 1.8% in December.
The data has led to a reduction in market expectations for an interest rate cut from the Bank of Canada (BoC) in March. Markets are now pricing in a 63% probability that the BoC will keep rates unchanged at its March meeting, compared to 56% before the inflation data release.
Hawkish Fed Remarks Support USD
On the US side, hawkish remarks from Fed officials have provided additional support for the USD. San Francisco Fed President Mary Daly stated that further rate cuts in 2025 remain uncertain, despite positive signs in the US economy. Meanwhile, Philadelphia Fed President Patrick Harker emphasized the importance of maintaining a steady interest rate policy, as inflation remains elevated. Investors are awaiting further comments from Fed policymakers this week for more clues about future US interest rate moves.
Related topics:
New Zealand Inflation Expectations Show Mixed Trends for Q1 2025: RBNZ Survey
USD/INR Strengthens Ahead of U.S. PPI Data, INR Faces Pressure
Silver Prices Edge Higher Amid Trade War Concerns and U.S. Inflation Data
