Loonie Inches Up as Markets Eye Fed Decision

The Canadian dollar rose modestly against its US counterpart on Tuesday, despite declining oil prices. The loonie gained 0.2% to trade at 1.41 per USD, or 70.92 cents. Market participants are looking ahead to the Federal Reserve's interest rate decision later this week.

Analysts suggest that market expectations for a Fed rate increase may be overstated, citing cooler inflation data and reduced tensions between the US and Iran. This could indicate that the central bank faces a higher threshold for raising rates than currently reflected in rate futures markets.

The Bank of Canada is set to release minutes from its most recent policy meeting on Wednesday, where it maintained its benchmark interest rate at 2.25% and projected stronger growth in the second half of the year as inflation pressures subside. Canadian GDP data for May will be released on Friday, with analysts forecasting a monthly increase of 0.2%.