Ella 
USD/CAD rose slightly to around 1.3665 in early Asian trading on Tuesday. A slight rebound in the U.S. dollar has provided some support for USD/CAD. Meanwhile, lower oil prices weighed on the commodity-linked Canadian dollar. Investors will be keeping a close eye on Canada’s gross domestic product (GDP) growth data for February. Focus will turn to Wednesday’s Federal Reserve interest rate decision.
Fed policymakers see no urgency to cut interest rates. Federal Reserve Governor Michelle Bowman said there are “upside risks” to inflation. At the same time, Minneapolis Fed President Neel Kashkari suggested that there may not be an interest rate cut this year. Atlanta Fed President Raphael Bostic said he may favor raising interest rates if inflation worsens. The U.S. Federal Reserve’s “maintaining higher interest rates for a longer period of time” boosted the U.S. dollar against the Canadian dollar and constituted a “boosting” factor for the U.S. dollar/Canadian dollar.
Investors will pay close attention to the Fed’s policy tone in statements and press conferences. If the Fed remains hawkish, it may strengthen the dollar and attract more foreign capital inflows. On the other hand, if the Fed releases a dovish tone, it may put some selling pressure on the US dollar.
In the Canadian dollar, traders expect the Bank of Canada (BOC) to wait until June or July before starting to cut policy rates. February’s monthly gross domestic product rate may provide some hints about how the Canadian economy is performing. If the data is weaker than expected, it could prompt the Bank of Canada (BOC) to cut interest rates sooner and put pressure on the Canadian dollar. At the same time, since Canada is the largest exporter of crude oil to the United States, a further decline in oil prices may put some selling pressure on the Canadian dollar.
