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 capped at 1.3600, awaits key US event risks

GBP/USD is consolidating in Friday's European trading after facing rejection at 1.3600 earlier on. Traders remain on the sidelines and refrain from placing fresh bets on the major ahead of the critical US Nonfarm Payrolls benchmark revision and Fed Chair Warsh's debut at the Jackson Hole Symposium. Both events could ramp up market volatility.

EUR/USD hovers around 1.1650 ahead of NFP revision, Warsh

EUR/USD is treading water at around 1.1650 in the European session on Friday. The pair faces headwinds as the US Dollar clings to its recent recovery ahead of the US Nonfarm Payrolls benchmark revision and Fed Chair Warsh's Jackson Hole speech. However, the downside appears cushioned by hawkish ECB expectations.

Gold holds gains above $4,600 as bullish bias prevails

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Hyperliquid rally stretches thin amid treasury growth, CFTC innovation push

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Kevin Warsh’s Jackson Hole dilemma: Say too much, too little, or just enough

Kevin Warsh is preparing to deliver his first Jackson Hole speech as Federal Reserve Chair on Friday, and expectations extend well beyond whether interest rates will be raised or left unchanged in September. The Jackson Hole symposium, held from August 27 to 29, has the official theme “Financial Innovation: Implications for Payments and Policy.”

Kevin Warsh’s Jackson Hole dilemma: Say too much, too little, or just enough

Kevin Warsh is preparing to deliver his first Jackson Hole speech as Federal Reserve (Fed) Chair on Friday, and expectations extend well beyond whether interest rates will be raised or left unchanged in September.