USD/CAD hangs near YTD low; flat lines above 1.3700 ahead of BoC, US macro data

USD/CAD lacks any firm intraday direction as traders keenly await the BoC policy update.
Fed rate cut bets and US fiscal concerns cap the overnight USD recovery and spot prices.
A downtick in Crude Oil prices undermines the Loonie and acts as a tailwind for the pair.

Haresh Menghani FXStreet

The USD/CAD pair extends its sideways consolidative price move through the Asian session on Wednesday and remains close to its lowest level since October 2024 touched earlier this week. Spot prices currently trade around the 1.3715-1.3720 area, nearly unchanged for the day, as market participants await the Bank of Canada (BoC) policy update.

The BoC is scheduled to announce its decision later during the North American session and is widely expected to leave the key interest rate unchanged at 2.75%. Hence, investors will closely scrutinize the accompanying policy statement and the post-meeting press conference for cues about the future policy outlook. This will play a key role in influencing the Canadian Dollar (CAD) and provide some meaningful impetus to the USD/CAD pair.

Heading into the key central bank event risk, the ADP report on US private-sector employment and the US ISM Services PMI will drive the US Dollar (USD) demand, which, in turn, should assist traders to grab short-term opportunities. Any meaningful upside for the USD/CAD pair, however, seems elusive in the wake of a bearish sentiment surrounding the buck amid bets that the Federal Reserve (Fed) will lower borrowing costs further in 2025.

Apart from this, concerns about the worsening US fiscal condition might keep a lid on the attempted USD recovery from a six-week low touched on Tuesday. However, a modest downtick in Crude Oil prices seems to undermine the commodity-linked Loonie and act as a tailwind for the USD/CAD pair. Nevertheless, the aforementioned bearish fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.

Economic Indicator

BoC Monetary Policy Statement

At each of the Bank of Canada (BoC) eight meetings, the Governing Council releases a post-meeting statement explaining its policy decision. The statement may influence the volatility of the Canadian Dollar (CAD) and determine a short-term positive or negative trend. A hawkish view is considered bullish for CAD, whereas a dovish view is considered bearish.

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