The US dollar is higher against the Canadian dollar on Wednesday morning ahead of a likely decision by the US Federal Reserve to keep interest rates steady at its meeting later today. That follows a rally in the Canadian dollar yesterday thanks in part to a recovery in the price of oil.
USD/CAD was higher by 14 pips (+0.11%) to 1.3173 with a daily range of 1.315 to 1.318 as of 9.30am GMT. The currency pair slid yesterday afternoon, making a low near 1.315 before retracing about a third of the losses on Wednesday morning.
Forex markets are positioning ahead of the US interest rate decision from the Federal Open Market Committee (FOMC) at 19:00 GMT. It is almost certain that there will be no change to policy at this meeting, meaning the benchmark US interest rate will remain at a range of 1.5-1.75%.
There will be no update to the Federal Reserve’s quarterly economic forecasts and analysts are mostly expecting the official statement that accompanies the meeting to be essentially unchanged from the previous meeting in December. That means any movement in currencies will likely happen as a result of Chair Jerome Powell’s press conference. Powell’s opinion on the stubbornly low inflation despite high employment, the US manufacturing recession and the effect of the coronavirus will all be noteworthy.
Data out of the US yesterday seemed to represent the current economic situation in the United States well. Durable goods orders (stripping out defence and aeroplanes) unexpectedly fell but consumer confidence came in at its highest since the dot come bubble in the late nineties.
By comparison, in Canada interest rates are set almost identically to the US at 1.75% by the Bank of Canada. The difference is that recently the bank offered guidance that Canadian interest rates could be lowered in the coming meetings.
The lift in the Canadian dollar and away from year-to-date lows was helped by a rise in oil prices as well as a general recovery in risk sentiment that diminished demand for the US dollar as a haven.
