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USDCAD: Canadian Dollar Falls Against US Peer Ahead of FOMC

Simon Mugo trader
Updated 2 Feb 2023

The USDCAD currency pair was trading up over 40 pips at writing as the US dollar rallied against its Canadian peer. The Canadian dollar failed to capitalise on the much-awaited Canadian GDP data for December, which met analysts’ expectations of a 0.1% expansion.

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The currency pair maintained the positive momentum from yesterday as investor attention remained focused on the US Fed interest rate decision scheduled for tomorrow. Most investors hope that the Fed will hike rates by 25 basis points and adopt a dovish tone, thus, weakening the dollar.

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However, today’s move higher indicates that despite tomorrow’s dovish expectations of the FOMC monetary policy decision, investors are betting on a stronger dollar as the Fed is the only central bank that has successfully curtailed inflation via aggressive rate hikes, while most of its peers are lagging inflation. 

The Fed has maintained that it remains open to tightening monetary policies if market conditions warrant the same, especially if the stock markets start accelerating higher. From the beginning, the fed has been keen on inflicting maximum pain on investors to stop the rampant speculation that drove markets to unsustainable heights. 

Investors have learnt not to underestimate Fed Chair Jerome Powell’s resolve to hike rates and ensure that the markets do not overheat while at the same time keeping inflation in check. Many are interested in what the Fed chair will say after the FOMC announces its interest rate decisions. 

Meanwhile, the Canadian dollar was also weighed down by the weak crude oil prices as tracked by the West Texas Intermediate (WTI), which has been falling for the past three days after bouncing off the resistance level at $81.50.

I expect the US dollar’s rally to continue tomorrow, especially if the Fed maintains its hawkish rhetoric, which is highly likely. Therefore, the USDCAD currency pair could maintain its upward momentum into tomorrow. 

*This is not investment advice. 

The USDCAD price chart. 

The USDCAD currency pair was trading up 41.2 pips (0.31%) after the release of Canadian GDP data.


YOUR CAPITAL IS AT RISK. 81% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading