The Canadian Dollar (CAD) versus the United States Dollar (USD), commonly known as USD/CAD, remained relatively stable on Wednesday, just before the scheduled release of minutes from the Federal Reserve's January meeting.
Jerome Powell is currently serving as the 16th Chair of the Federal Reserve of the United States.
USD/CAD Stability Amidst Anticipated Fed Insights
The USD/CAD pair found itself stuck in a narrow range ahead of the anticipated insights from the FOMC minutes.
Canada's housing market showed signs of slowing, with the New Housing Price Index declining 0.1% in January compared to the previous month.
The annualized figure also showed a deceleration but remained below the previous print, suggesting that the cooling trend may not be as pronounced as some had anticipated.
In America, there was considerable expectation that the Federal Reserve would soon make public the minutes from their January encounter.
As long as the labor market holds up, the Fed can afford to slow-walk rate cuts. Inflation-fighting is much easier when the labor market cooperates
Jamie Cox, managing partner at Harris Financial Group
Market Focus on Fed Minutes for Rate Clues
The financial markets eagerly awaited these minutes, seeking any hints regarding the timing and number of anticipated rate cuts.
Reuters polled economists and a slim majority is expecting the Fed to cut interest rates in June.
Many analysts and traders believe that the Federal Reserve will begin easing monetary policy in June, with expectations pointing to a total of 94 basis points (bps) worth of rate reductions this year.
The upcoming minutes from the Federal Reserve's last policy meeting may shed more light on their perspective, potentially affecting exchange rates for USD/CAD and significant currency pairs.
The chief economist for Asia ex-Japan at Mizuho Bank, Vihnu Varathan, says, “The overarching FOMC minutes takeaway must be that it is not (yet) time to initiate a rate cut.”
In the meantime, the Canadian Dollar weakened against several major currencies.
Against the Swiss Franc, it was down 0.4%, and versus the British Pound, it dropped by 0.3%.
The USD/CAD pair traded at around 1.3520 during this period, just above its 200-day Simple Moving Average (SMA) of 1.3478.
Technical Analysis: USD/CAD Holds Key Support Zone
Respecting a substantial space, the pair stayed within the support range between 1.3480 and 1.3470, an area that surpassed their previous Order Block at 1.3460.
Technically, the daily candles showed that the USD/CAD pair struggled to break through the 200-day SMA but demonstrated a pattern of higher lows and rising support at the mentioned levels.
Last week's data showed sticky US inflation, and this prompted investors to push back the bet that Fed would start cutting rates in March, the prevailing notion at the start of the year. They are now pricing in the first cut in June.
There is still enough of a question mark with respect to incoming data and as a result we've seen the dollar come under a bit of pressure
Bipan Rai
Market Momentum Stays Thin Ahead of US Data Releases
The overall market momentum remained thin, with significant U.S. data releases due on Thursday in the form of PMI figures and Friday with the latest Monetary Policy Report.
This anticipation kept traders on edge, as any significant shifts in these reports could impact the USD/CAD pair and broader financial markets.
Additionally, the minutes from the Federal Reserve's January meeting were expected to shed light on upcoming decisions regarding the reduction of the size of its balance sheet.
By the end of January, the significant improvement in financial circumstances that occurred during the final quarter had mostly come to an end.
Since then, the picture has been mixed, with Treasury yields increasing and stocks continuing to reach record highs.
Despite these developments, uncertainty remains around the timing and magnitude of future rate cuts, keeping the USD/CAD pair and broader financial markets in a state of anticipation.