USD/CAD refreshes day high above 1.3720 as investors turn cautious ahead of Fed policy

The USD/CAD pair has printed a fresh intraday high at 1.3725 in the Asian session. The upside in the Loonie asset has been fueled by a recovery move from the US Dollar Index (DXY) and a corrective move in the oil price. Soaring anxiety among investors ahead of the interest rate decision by the Federal Reserve (Fed) is improving USD Index’s appeal.

The USD Index has recovered to 103.87 and is gathering strength to extend its recovery above the immediate resistance of 104.00. Meanwhile, S&P500 futures have surrendered the majority of their gains earned in the early Tokyo session. This portrays that the risk aversion theme is extremely solid and investors are using rallies for building more shorts.

US equities are facing severe heat led by deepening fears of global banking turmoil and anxiety among investors ahead of Fed policy. In a recent poll by Reuters, 76 of 82 economists believe that the US Federal Reserve (Fed) would raise its policy rate by 25 basis points (bps) to the range of 4.75-5% following the March Federal Open Market Committee (FOMC) meeting.

Meanwhile, the Canadian Dollar is dancing to the tunes of the inflation data, which will release on Tuesday. As per the consensus, the monthly headline Consumer Price Index (CPI) is expected to accelerate by 0.4%, lower than the former release of 0.5%. This might drag the annual headline CPI further to 5.5%. Also, the annual core CPI is expected to trim to 4.6% from the former release of 5.0%.

Investors should be aware of the fact that Bank of Canada (BoC) Governor Tiff Macklem has already held interest rates steady at 4.5%. BoC Macklem considers the current monetary policy as restrictive enough to scale down price pressures.

On the oil front, oil price has corrected to near $66.30 as the People’s Bank of China (PBoC) kept the interest rate policy unchanged. The street was anticipating an expansionary policy to infuse more liquidity into the economy. It is worth noting that Canada is a leading exporter of oil to the United States and lower the oil price might impact the Canadian Dollar further.