- USD/CAD extends gains as the Fed is widely anticipated to maintain its current rates on Wednesday.
- The pair rises due to the potential for a widening interest rate differential between the US and Canada.
- The commodity-linked CAD could have struggled amid weaker crude Oil prices.
USD/CAD gains ground for the third consecutive day, trading around 1.4420 during the European hours on Wednesday. The pair may further appreciate as the US Dollar (USD) receives support from the Federal Reserve’s (Fed) cautious stance regarding upcoming Wednesday’s policy decision.
According to the CME FedWatch tool, market expectations indicate nearly 100% certainty that the Fed will maintain its policy rate within the target range of 4.25%-4.50%. However, traders will be closely monitoring Fed Chair Jerome Powell’s press conference for any hints regarding the future direction of monetary policy.
The Canadian Dollar (CAD) is under pressure due to diverging monetary policy expectations, as traders anticipate a widely expected rate cut from the Bank of Canada (BoC) while the US Federal Reserve is expected to hold rates steady later in the North American session.
The USD/CAD pair gained support from increased risk aversion following tariff threats made by US President Donald Trump. The risk-sensitive CAD weakened following renewed concerns over US trade policy after President Donald Trump threatened over the weekend to impose a 25% tariff on Canadian goods starting February 1.
This potential tariff threat has sparked fears of major trade disruptions with the United States, Canada’s largest trading partner, potentially reducing foreign exchange inflows, particularly in the manufacturing sector.
Additionally, the commodity-linked CAD may have faced additional downward pressure from declining crude Oil prices, as Canada is the largest crude exporter to the United States. Oil prices have fallen amid investor concerns over the broader economic impact of tariffs on Canada, Mexico, and China, which could weaken global energy demand and overall economic growth.
(This story was corrected on January 29 at 08:30 GMT to say, in the third paragraph, that the Fed is expected to hold rates steady later in the North American session, not tomorrow.)
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks

GBP/USD holds above 1.2600 after strong UK inflation data
GBP/USD holds steady above 1.2600 in the European morning on Wednesday after the data from the UK showed that the annual CPI inflation climbed to 3% in January from 2.5% in December. Market focus shifts to mid-tier US data and FOMC Minutes.

EUR/USD holds positive ground near 1.0450, FOMC Minutes in focus
The EUR/USD pair posts modest gains to around 1.0450 during the Asian trading hours on Wednesday, bolstered by the weakening of the US Dollar. However, tariff concerns and tense Russia-Ukraine negotiations might boost the Greenback and cap the upside for the major pair.

Gold price recovers early lost ground; holds steady near record high amid trade war fears
Gold price attracts some dip-buying as trade war fears continue to underpin safe-haven assets. Fed rate cut bets keep the USD bulls on the defensive and further lend support to the XAU/USD. A positive risk tone might cap the commodity as traders await the release of the FOMC minutes.

Maker Price Forecast: MKR generates highest daily revenue of $10 million
Maker (MKR) price extends its gains by 6%, trading around $1,189 on Wednesday after rallying more than 20% so far this week. Artemis data shows that MKR generated $10 million in revenue on February 10, the new yearly high in daily revenue.

Rates down under
Today all Australian eyes were on the Reserve Bank of Australia, and rates were cut as expected. RBA Michele Bullock said higher interest rates had been working as expected, slowing economic activity and curbing inflation, but warned that Tuesday’s first rate cut since 2020 was not the start of a series of reductions.

The Best Brokers of the Year
SPONSORED Explore top-quality choices worldwide and locally. Compare key features like spreads, leverage, and platforms. Find the right broker for your needs, whether trading CFDs, Forex pairs like EUR/USD, or commodities like Gold.