USD/CAD flatlines below 1.3700 heading into Fed and BoC rate decisions

USD/CAD stalls below 1.3700 after bouncing from weekly lows below 1.3600.
The BoC is expected to leave rates at 2.25%, forecasting a short-lasting inflationary spike.
The Fed is also anticipated to keep rates on hold with the future of Chairman Powell in question.

Guillermo Alcala FXStreet

The US Dollar (USD) is trading practically flat against the Canadian Dollar (CAD) on Wednesday. The pair has stalled below 1.3700, after bouncing from lows sub-1.3600 earlier this week, as investors bid their time ahead of the outcomes of the Bank of Canada (BoC) and the US Federal Reserve (Fed) monetary policy meetings due later in the day.

The BoC is widely expected to leave its benchmark rate unchanged at the current 2.25%, despite higher inflationary pressures stemming from the war in the Middle East. BoC Governor Tiff Macklem affirmed earlier this month that he expects inflationary pressures to spike in the near-term, to return towards the bank’s 2% rate by the end of the year.

A few hours later, the Fed will release the decision of its last meeting with Jerome Powell at the front. The bank is also expected to leave interest rates on hold this time, and probably also during the whole 2026. The monetary policy committee, however, remains deeply divided, and the presumed next Fed Chair, Kevin Warsh, will have to cope with pressures from US President Trump to ease monetary policy.

Apart from that, Powell will have to decide whether to continue as Governor, as his term at the board extends until 2028, or leave the bank, as Trump demands. Fed chairs normally leave the bank once their four-year term expires. In this case, however, it might be different as Powell has suggested that he would remain at the bank if he sees its independence under threat.

Economic Indicator

BoC Interest Rate Decision

The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.

Economic Indicator

Fed Interest Rate Decision

The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).

GBP/USD remains in two-day highs around 1.3260

GBP/USD adds to Friday’s bounce, gathering fresh traction and flirting with the 1.3270 zone on Monday, or two-day tops. Cable’s decent advance comes despite the move higher in the Greenback and investors’ assessing of UK PM K. Starmer's resignation.

EUR/USD remains offered; focus is on 1.1400

EUR/USD rapidly gives back Friday’s rebound and trades with marked losses near 1.1420, or three-month lows, in the latter part of Monday’s NA session. The pair’s intensifies its retracement following the continuation of the robust upside momentum in the US Dollar. Next on tap will be preliminary PMIs the Germany and the Euroland.

Gold bounces off lows, looks to surpass $4,200

Gold regains composure and leaves behind three-consecutive daily declines on Monday, looking to regain the area above the $4,200 mark per troy ounce. Reports of progress in the latest round of US-Iran talks are helping the precious metal maintain its footing at the start of the week, although the stronger Greenback seems to limit the upside potential for now.

XRP recovery underpinned by persistent ETF inflows

Ripple (XRP) gains momentum on Monday, trading above $1.15 as the crypto market widely recovers. This recovery comes amid easing geopolitical tensions in the Middle East, following reports that the United States (US) and Iran made progress in the first round of talks aimed at achieving a lasting peace agreement.

Is Shiba Inu dead or just in a crisis? The data behind SHIB's 95% crash

SHIB, the dog-themed meme coin that became one of the biggest success stories in crypto and turned early buyers into crypto millionaires, is facing tough times. Its price has fallen more than 32% so far this year, and it is down 95% from its all-time high in 2021. Is SHIB simply another fading meme coin, or is the market overlooking a possible recovery story?

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.