USD/CAD confined in tight range ahead of FOMC, Canada CPI

The USD/CAD currency pair traded within a narrow range on Tuesday ahead of the outcome of the Federal Reserve’s two-day policy meeting and Canada’s CPI data.

Markets are now pricing in about a 67% chance of a 50 basis point Fed rate cut at the Fed’s September 17th-18th policy meeting, compared to a 30% chance a week ago.

Futures markets continued to price in 125 basis points of Fed rate cuts by the end of this year.

Additional focus will be on the upcoming US retail sales for August, a key consumer spending-related indicator.

Market players will be also looking into Canadian CPI inflation data for August due out later today.

The median CPI inflation probably eased to 2.3% in August, according to market consensus, from 2.4% in July. The latter has been the lowest rate since mid-2021.

The trimmed-mean core inflation rate, the Bank of Canada’s preferred measure of underlying inflation, probably slowed to 2.6% in August from 2.7% in July. The latter has been the lowest rate since June 2021.

As of 8:59 GMT on Tuesday the USD/CAD currency pair was inching down 0.02% to trade at 1.3584.