USD/CAD Rises Amid Fed Expectations and Tariff Uncertainty

The Canadian dollar is facing renewed pressure against its US counterpart, USD/CAD, which has gained over 0.2% in the last two trading sessions.

This is largely due to expectations surrounding the Federal Reserve's interest rate decision this week, with market probabilities indicating a 62% chance of no change and a 38% probability of a rate hike.

The Bank of Canada maintains an unchanged rate near 2.25%, while the US holds a higher reference rate at 3.75%. The widening rate differential is likely to favor USD-denominated investments, supporting the strength in the US dollar.

The tariff threat on Canadian goods remains relevant, with no immediate response from Canada and ongoing negotiations between the two countries. Trade uncertainty continues to weigh on the Canadian dollar, limiting its potential recovery.