USD/CAD jumps to near 1.3750, investors await Fed’s and BoC’s monetary policy outcome

USD/CAD advances to near 1.3750 as the US Dollar continues to move higher.
The tariff deal between the US and the EU has strengthened the US Dollar.
Both the Fed and the BoC are expected to hold interest rates steady on Wednesday.

Sagar Dua FXStreet

The USD/CAD pair extends its winning streak for the fourth trading day on Tuesday, rising to near 1.3755. The Loonie pair strengthens as the US Dollar (USD) continues to outperform its peers, following the announcement of the tariff deal between the United States (US) and the European Union (EU) over the weekend.

During the European session, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, advances to near 99.00. This is the highest level seen in a month.

The US-EU deal has strengthened the US Dollar as investors believe that reciprocal tariffs announced by President Donald Trump on the so-called “Liberation Day” were not as bad as they appeared initially. Washington has used tariffs to close better trade agreements against its key trading partners and boost domestic manufacturing.

Meanwhile, investors await the Federal Reserve’s (Fed) and Bank of Canada (BoC) monetary policy announcement on Wednesday. Both central banks are expected to leave interest rates at their current levels.

In today’s session, investors will focus on the US JOLTS Job Openings data for June, which will be published at 14:00 GMT. Economists expect US companies to have posted 7.55 million jobs, slightly lower than 7.77 million in May.

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.

GBP/USD trims gains; back to 1.3450-ish

The persistent weakness hurting the Greenback lends support to the British Pound and the rest of the risk-linked assets, sending GBP/USD to new two-day tops past 1.3480 on Wednesday. Indeed, Cable advances for the second day in a row helped by the constant optimism around a potential US-Iran deal.

EUR/USD clings to gains near 1.1550

EUR/USD builds on Tuesday’s advance and confronts the area of multi-week highs in the 1.1550-1.1560 band on Wednesday. The continuation of the pair’s recovery comes once again on the back of the renewed selling pressure on the US Dollar, always in response to diminishing geopolitical tensions.

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