- USD/CAD steadies as traders await Powell’s guidance on oil surge impact on Fed policy outlook.
- Federal Reserve expected to hold benchmark rate steady at 3.50%–3.75% in March.
- Rabobank strategists expect BoC to hold rates at 2.25% through year-end despite inflation and slowing growth.
USD/CAD remains flat after posting little gains in the previous session, hovering around 1.3690 during the Asian hours on Wednesday. The pair holds steady as traders remain cautious ahead of policy decisions from both the Federal Reserve (Fed) and the Bank of Canada (BoC) later in the day.
Traders are particularly focused on guidance from Fed Chair Jerome Powell regarding how the recent surge in oil prices may influence the central bank’s policy outlook. Markets widely anticipate that the Federal Reserve will keep its benchmark interest rate unchanged within the 3.50%–3.75% range for March, according to the CME FedWatch Tool. Such a move would mark a second consecutive pause, underscoring a cautious approach amid rising economic and geopolitical uncertainty.
On the Canadian side, Rabobank strategists Molly Schwartz and Christian Lawrence expect the BoC to hold its overnight rate at 2.25% at Wednesday’s meeting and maintain that level through year-end, despite persistent inflation and slowing economic activity. This March policy view aligns with the consensus among Bloomberg-surveyed analysts and is already fully priced in by markets. The conflict involving Iran and elevated oil prices are seen adding inflationary pressure that monetary policy may struggle to counter, while markets tentatively price in the possibility of a rate hike.
USD/CAD may remain supported as the Canadian Dollar (CAD) faces pressure from softer oil prices. West Texas Intermediate (WTI) crude has pared recent gains, trading near $94.00 per barrel at the time of writing.
However, oil prices could find renewed support amid escalating tensions around the Strait of Hormuz. The US military reported targeting Iranian coastal sites near the strait due to threats from anti-ship missiles to global shipping, according to Reuters. Meanwhile, the BBC reported that Israel claimed responsibility for strikes that killed senior Iranian officials, including Ali Larijani and Basij chief Gholamreza Soleimani.
