USD/CAD falls to 1 1/2-week low ahead of cenbank meetings

The USD/CAD currency pair was hovering above a 1 1/2-week low of 1.3762 on Tuesday ahead of the outcome of the Federal Reserve’s and the Bank of Canada’s policy meetings.

The Fed is widely expected to lower its federal funds rate target range by 25 basis points to 4.00%-4.25% at its September meeting.

Markets are also pricing in a 4% chance of a super-sized 50 basis point cut.

In July, the Fed kept borrowing costs without change, but two governors dissented in favor of a rate cut, which has been the first such dual dissent since 1993.

And, the minutes from the Fed’s meeting in July showed that most policy makers remained more concerned about persistent inflation pressures than about labor market risks.

Investors will also be paying close attention to the press conference with Fed Chair Jerome Powell for clues over the timing of future interest rate cuts as well as to the new set of FOMC economic forecasts.

Meanwhile, the Bank of Canada is expected to lower its benchmark interest rate by 25 basis points to 2.50% at its September 17th policy meeting.

In July, policy makers noted that the Canadian economy had so far remained resilient to tariffs already mandated, as employment keeps holding up and second-half growth forecasts remain optimistic under the current tariff scenario.

Yet, the economy was expected to contract in Q2, as exporters received fewer orders after front-loading deliveries in Q1.

The USD/CAD currency pair was last down 0.08% on the day to trade at 1.3767.