The USD/CAD pair moves higher to 1.3660 in Wednesday’s American session. The Loonie asset gains as the US Dollar rises amid caution ahead of the release of the Federal Open Market Committee (FOMC) minutes, which will be published later the day.

The FOMC minutes will provide more cues about whether policymakers are comfortable with market expectations for the Federal Reserve (Fed) shifting to policy normalization from the September meeting.

Ahead of the FOMC minutes, the market sentiment is slightly nervous. The S&P 500 has opened on a cautious note. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rose to 104.80. 10-year US Treasury yields rise to 4.43% as Fed officials keep emphasizing the need to maintain interest rates at their current levels for a longer period.

Despite the expected decline in the US Consumer Price Index (CPI) data for April, Fed policymakers support for continuing a restrictive interest rate stance as a one-time decline in price pressures is insufficient to build confidence that the progress in the disinflation process has resumed.

Meanwhile, the Canadian Dollar is expected to face significant pressure as speculation for the Bank of Canada (BoC) to begin reducing interest rates from the June meeting has strengthened after soft inflation report for April. Statistics Canada reported on Tuesday that BoC’s preferred inflation measure grew at a slower pace of 1.6% from the prior reading of 2% on a year-on-year basis. Annual headline CPI decelerated to 2.7% as expected from the former reading of 2.9%.

USD/CAD

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