USD/CAD under pressure ahead of Fed rate decision

Key Movers

The USD struggles to find a solid ground ahead of the US Federal Reserve's highly anticipated monetary policy decision today. Markets are expecting the Fed to raise the benchmark policy rate by 25 bps taking it to the range of 5.25-5.5%. The key notes and statements by Fed Chairman Jerome Powell will be closely watched by the markets to get foresight into the central bank’s stance on future rate hikes. In addition, The US Bureau of Economic Analysis (BEA) is expected to publish its first estimate of Q2 Gross Domestic Product (GDP) data tomorrow. The US economy is estimated to grow at an annualized rate of 1.8% in the second quarter, following the 2% growth rate recorded in the first quarter. The other set of data to be released tomorrow is the US Durable Goods Orders and the weekly Jobless Claims report. The benchmark 10-year US Treasury bond yield began the week on a stable note and ascended to 3.9% before stabilizing slightly below these levels this morning.

The European Central Bank (ECB) is scheduled to publish its monetary policy decision tomorrow and the markets are anticipating another 25 bps hike. The ECB raised its key interest rates by 0.25% in its June policy meeting. The EUR trades with modest gains against the USD ahead of the Fed’s policy meeting today. The EUR/USD pair regained strength and stares at retesting the 1.1100 levels.

The GBP/USD pair regains its ground ahead of the interest rate decision by the Bank of England (BoE), which is scheduled to be announced on August 3. Non-stop hikes in the interest rates by BoE have already slowed the economic growth for the country, however, the BoE is not in a position to evade raising rates further as inflation is at an all-time high, almost four times the required rate of 2%. The expected rate hike of 25 bps at the August policy meeting would be the 14th consecutive hike, raising rates to 5.25%.