Ella 
In early Asian trading on Tuesday, USD/CAD was still under selling pressure. Canada’s November gross domestic product is expected to be released on Wednesday, with a monthly rate of 0.1% expected. Focus will turn to Wednesday’s Federal Open Market Committee (Fed) meeting, where the central bank is expected to remain on hold. As of press time, USD/CAD was trading at 1.3510, down 0.01% throughout the day.
The inflation indicator that the Fed focuses on – the U.S. core PCE price index in December increased by 0.2% on a monthly basis, compared with a 0.1% increase in the previous value; and an annual rate of 2.9%, compared with a 3.2% increase in the previous value. On Monday, the Dallas Fed Manufacturing Business Index for January was -27.4, compared with the previous reading of -10.4. The Federal Reserve will announce its interest rate decision on Wednesday. Most economists expect the first rate cut to occur in May or June, but a cut at the Fed’s March meeting is not out of the question.
In addition to this, rising geopolitical tensions in the Middle East may boost safe-haven currencies such as the US dollar. Earlier on Tuesday, Sky News reported that President Joe Biden could authorize U.S. military action in the Middle East as early as Monday evening, following reports of an attack in northeastern Jordan near the Syrian border on Friday. A drone strike in the area killed three U.S. troops and injured dozens more.
In the Canadian dollar, Canada’s November GDP growth data is expected to be slightly higher. Gross domestic product is expected to expand 0.1%, compared with a flat 0.0% in October. Meanwhile, rising oil prices could boost the commodity-linked Canadian dollar and be bearish for USD/CAD.
