USD/CAD remains under pressure above 1.3500, Canadian GDP, Fed rate decision eyed

The USD/CAD pair remains under selling pressure during the early Asian trading hours on Tuesday. Canada’s Gross Domestic Product (GDP) for November will be due on Wednesday, which is forecast to expand by 0.1% MoM. The attention will shift to the Federal Open Market Committee (FOMC) meeting on Wednesday, with no change in rate expected. At press time, USD/CAD is trading at 1.3510, down 0.01% for the day.

The US Core Personal Consumption Expenditures Price Index (PCE) for December, the Fed’s preferred inflation gauge, rose by 0.2% on the month from 0.1% in the previous reading and increased by 2.9% on a yearly basis from the previous reading of 3.2%. On Monday, the US Dallas Fed Manufacturing Business Index for January came in at -27.4 versus -10.4 prior. The Federal Reserve (Fed) will announce its interest rate decision on Wednesday. Most economists expect the first rate cut to occur in May or June, though a cut at the Fed’s March meeting is not off the table.

Apart from this, the rising geopolitical tensions in the Middle East might boost the safe haven currency like the Greenback. Early Tuesday, Sky News reported that US President Joe Biden is likely to authorize US military action in the Middle East as early as Monday night after three American troops were killed and dozens more were injured in an overnight drone strike in northeast Jordan near the Syrian border on Friday.  

On the Loonie front, Canada is expected to see a slight expansion in November GDP growth numbers. The GDP figure is projected to grow by 0.1% compared to the flat 0.0% in October. Meanwhile, a rise in oil prices might lift the commodity-linked Loonie and act as a headwind for the USD/CAD pair. 

Market participants will closely watch the Fed’s upcoming rate decision and monetary policy statement at 19:00 GMT on Wednesday. Traders will take cues from the press conference and find trading opportunities around the USD/CAD pair.