USD/CAD Rises Amid Hawkish Fed Expectations, Gold Falls to Three-Week Low

The USD/CAD currency pair is rising ahead of the Bank of Canada's (BoC) interest rate decision later today, as market expectations shift towards a more hawkish Federal Reserve. The BoC is likely to keep rates unchanged at 2.25%, given the central bank's delicate balancing act between slowing economic growth and inflationary pressures.

Canada's manufacturing sector has shown signs of expansion in August, with output and employment increasing for a fifth consecutive month. However, trade tensions remain a concern, casting doubt on whether this growth can be sustained.

The market is increasingly expecting the Federal Reserve to hike rates by 25 basis points in September, following a hawkish stance from Federal Reserve Chair Kevin Warsh at Friday's Jackson Hole Symposium speech. The U.S. dollar is gaining on safe-haven demand and rising Treasury yields, further supporting the case for a rate hike.

Meanwhile, gold prices have fallen to a three-week low as oil prices rise and Treasury yields increase. Tensions in the Middle East have re-escalated, with Brent crude above $95 a barrel, lifting inflationary concerns and pushing Treasury yields higher. The stronger U.S. dollar is also dampening gold's appeal.

Technical analysis suggests that USD/CAD could extend gains towards 1.4080 if momentum continues to build, while gold may fall further if support at 4,325 breaks.