- USD/CAD oscillates around 1.4400 as investors await key monetary policy decisions by the BoC and the Fed.
- The Fed is expected to leave interest rates at their current levels amid uncertainty over Trump’s economic policies.
- The BoC would reduce interest rates by 25 bps to trim upside risks of price pressures remaining persistently lower.
The USD/CAD pair trades in a tight range around 1.4400 in Thursday’s European session. The Loonie pair consolidates as investors shift their focus to the monetary policy meetings of the Federal Reserve (Fed) and the Bank of Canada (BoC), which are scheduled on Wednesday.
According to the CME FedWatch tool, the Fed is almost certain to keep interest rates unchanged in the range of 4.25%-4.50%. Traders expect the Fed to keep borrowing rates steady on the assumption that United States (US) President Donald Trump’s economic policies will be pro-growth and inflationary for the economy.
Trump has threatened to raise 25% tariffs on China and Mexico and 10% on China. Also, he has signaled plans to impose tariffs on the Eurozone too, but no further details have been provided. Trump mentioned in the inauguration ceremony that funds from tariffs would be utilized to bear the burden of tax cuts on the Treasury. "Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” Trump said.
An inflated-environment with a strong economic outlook would force Fed officials to support keeping interest rates elevated for longer.
Meanwhile, the Bank of Canada (BoC) is expected to unwind its policy restrictiveness further to boost economic growth and absorb growing risks of inflation undershooting the central bank’s target of 2%. The BoC reduced its interest rates by 175 basis points (bps) to 3.25% last year. Next week, the BoC is expected to cut its borrowing rates by 25 bps to 3%.
BoC’s dovish interest rate decision would further dampen the already weak appeal of the Canadian Dollar (CAD). The Canadian currency is already facing pressure as Trump is poised to impose hefty tariffs.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks

EUR/USD turns negative near 1.1000, Dollar trims losses
The now mild bounce in the US Dollar puts EUR/USD under pressure and drags it back to the proximity of the 1.1000 support as investors continue to assess the stronger-than-expected NFP figures in March (+228K).

GBP/USD stays offered around 1.3000 on USD-buying
The now generalised selling pressure hurting the risk complex sends GBP/USD back to the 1.3000 neighbourhood amid heavy losses and the marked rebound in the Greenback, particulalry following solid prints from the US labour market report.

Gold remains on the back foot around $3,000 after US Payrolls
In the wake of March’s US labour market report, Gold prices maintain their offered tone around the critical $3,000 mark per troy ounce amid marginal gains in the Greenback and further weakness in US yields.

Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.

Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.

The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.