USD/CAD extends its losses ahead of Canada’s interest rate decision, trades near 1.3450

• USD/CAD trims its intraday gains and extends its losses for the second session.
• BoC is expected to maintain its policy rate at 5.0% for the fourth consecutive time.
• Traders await the US PMI data to gain insights into business activities in the United States.

USD/CAD failed to capitalize on its intraday gains ahead of Canada’s interest rate decision scheduled to be released on Wednesday. The USD/CAD pair extends its losing streak for the second session, trading lower to near 1.3450 during the European session. However, the decline in Crude oil prices could put pressure on the Canadian Dollar (CAD), which in turn, limits the losses of the USD/CAD pair.

The Canadian Dollar (CAD) receives upward support as it is widely expected that the Bank of Canada (BoC) will deter from any policy rate cuts during its first meeting of the year. This would mark the fourth consecutive time that the BoC maintains the current interest rate at 5.0%. The anticipation for a steady policy is supported, especially after the release of Canada’s inflation figures in December, which revealed an unexpected increase of 3.4% in consumer prices over the last twelve months. Additionally, the BoC’s Trimmed-CPI and Median-CPI have remained firm, further contributing to the expectation of a status quo in the central bank’s policy rate.

The US Dollar Index (DXY) moves lower to near the 103.10 level with the 2-year and 10-year yields on US bond coupons standing at 4.32% and 4.10%, respectively, by the press time. The US Dollar faces challenges due to the downward movement in the bond market and improved risk appetite, which could be attributed to the renewed confidence in the market sentiment towards the Federal Reserve’s rate cuts in March.

Looking forward, market participants will likely observe the release of the preliminary S&P Global Purchasing Managers Index (PMI) data from the United States (US) scheduled for Wednesday. This data is significant for providing insights into business activities in the manufacturing and servicing sector within the United States.