The USD/CAD pair is trading marginally near 1.3855 during the Asian trading session on Wednesday. The Canadian pair is expected to trade broadly sideways as investors await monetary policy announcements by the Bank of Canada (BoC) and the Federal Reserve (Fed), which are scheduled to be released in the North American session.
At press time, the US Dollar Index (DXY), which tracks the value of the dollar against six major currencies, is trading flat around 99.25, after the bullish move the previous day. The DXY index attracted bids on Tuesday after the release of surprisingly upbeat US open jobs data for October. The data showed that new jobs announced increased marginally to 7.67 million from 7,658 in September, while they were expected to come in lower at 7.2 million.
According to the CME FedWatch tool, the probability that the Fed will cut interest rates by 25 basis points to 3.50%-3.75% at its December policy meeting is 87.6%. This will be the third interest rate cut by the Fed in a row.
Assuming the Fed is almost certain to ease interest rates further, the highlight of the central bank’s monetary policy will be the economic outlook report. The report will provide new estimates of inflation, growth and unemployment, and the Fed’s dot-matrix chart, which shows where policymakers collectively see the federal funds rate heading over the medium and long term.
Meanwhile, the Bank of Canada is expected to keep interest rates steady at 2.25% amid signs that the Canadian labor market is regaining strength. From September to November, the Canadian economy created 180.6 thousand new jobs after laying off 106.3 thousand workers in the period from July to August. The unemployment rate also fell to 6.9% in November from 6.5% in October.
Economic indicator
Federal interest rate decision
the Federal Reserve The Federal Reserve deliberates on monetary policy and decides on interest rates at eight pre-scheduled meetings annually. It has two mandates: keeping the inflation rate at 2%, and maintaining full employment. Its main tool for achieving this end is setting interest rates – at which banks lend and banks lend to each other. If it decides to raise interest rates, the US dollar (USD) tends to strengthen because it attracts more foreign capital inflows. If they lower interest rates, they tend to weaken the US dollar while draining capital to countries that offer higher returns. If interest rates are left unchanged, attention turns to the tone of the FOMC statement, and whether it is hawkish (expecting interest rates to rise in the future), or dovish (expecting interest rates to fall in the future).
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Next release:
Wednesday 10 December 2025 at 19:00
repetition:
irregular
consensus:
3.75%
former:
4%
source:
Federal Reserve
