Major Economic Data Could Drive Volatility
The USD/CAD pair remains stuck between key levels, with this week’s Federal Reserve meeting and Canadian inflation data in focus. While trade policy concerns persist, traders will be watching for signals on interest rate policyand broader economic conditions. Given the Loonie’s resilience despite negative headlines, even maintaining the status quo may not be enough to prevent short-term downside for USD/CAD.
FOMC Meeting Leads the Risk Calendar
The Federal Open Market Committee (FOMC) decision on Wednesday is the key event for both USD/CAD traders and global markets. Rate cuts aren’t expected, with markets assigning nearly zero probability of a change from the current 4.25%-4.50% range. Instead, attention will be on:
- The Fed’s statement and economic outlook
- The updated dot plot tracking policymakers’ rate expectations
- Jerome Powell’s press conference
Currently, markets are pricing in three rate cuts by year-end, up from just one forecasted a month ago. If the Fed aligns with these expectations—particularly if growth forecasts for 2025 are downgraded—it could push the U.S. dollar lower, benefiting the Canadian dollar.
Beyond the FOMC, U.S. economic reports this week include:
- Retail sales (Monday)
- Housing starts & permits (Tuesday)
- Jobless claims (Thursday)
With sentiment highly sensitive to economic weakness, worse-than-expected data could weigh further on the USD.
Canada’s Inflation Data & Economic Calendar
While tariff uncertainty and recent tax holidays have clouded Canada’s economic outlook, this week’s data will still be closely monitored:
- Tuesday: Inflation Report (Core CPI remains the key trend indicator)
- Thursday: Producer Price Index (PPI)
- Friday: Retail Sales & Housing Prices (Mortgage rate reductions could start influencing home prices)
If inflation pressures remain sticky, the Bank of Canada (BoC) may push back against early rate cut expectations, providing further support for the Canadian dollar. However, with mixed signals in recent reports, traders should brace for potential volatility.
