The USD/CAD pair has seen a recovery near 1.3730 during the early Asian trading hours on Thursday. This comes after the Federal Open Market Committee (FOMC) held its benchmark lending rate steady for the seventh time in a row at its June meeting. The decision came as no surprise to market players, but the accompanying statement from Fed Chair Jerome Powell provided some insight. Powell mentioned that the restrictive stance on monetary policy is impacting inflation as expected, but the Fed will wait for more progress before making any changes.
Investors are keeping an eye on upcoming economic data releases from the US, including the weekly Initial Jobless Claims, Producer Prices Index (PPI), and Fed’s John Williams speech scheduled for later on Thursday. The FOMC’s most recent economic predictions indicate that policymakers only anticipate one rate cut this year, a decrease from the three cuts forecasted in March. Additionally, the US Consumer Price Index (CPI) rose 3.3% YoY in May, slightly below both the previous reading and expectations.
On the Canadian front, Bank of Canada (BoC) Governor Tiff Macklem has made comments regarding the potential for rate divergence from the Federal Reserve. Macklem stated that while there is a limit to how far the BoC can diverge on rates, they are not close to reaching that limit. The BoC recently lowered its benchmark rate by 25 basis points to 4.75%, and the markets are already pricing in further cuts over the next couple of years.
The USD/CAD pair is experiencing some fluctuations due to the firmer US Dollar and statements from both the Federal Reserve and Bank of Canada. It will be important to monitor upcoming economic data releases and any further developments in central bank policies to gauge the future direction of the currency pair.