USD/CAD edges higher to near 1.4200 ahead of FOMC Minutes

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• USD/CAD gains ground to around 1.4195 in Tuesday’s late American session. 

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• Canada's annual CPI inflation rate rose to 1.9% in January.

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• Fed’s Daly said the policy should stay restrictive until more inflation progresses.

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The USD/CAD pair trades on a positive note around 1.4195 during the late American session on Tuesday. The hawkish remarks from Federal Reserve (Fed) officials underpin the US Dollar (USD). Investors brace for the FOMC Minutes, which will be released on Wednesday. 

Data released by Statistics Canada on Tuesday showed that Canada’s Consumer Price Index (CPI) rose by 1.9% YoY in January, compared to 1.8% in December, matching analysts’ expectations. On a monthly basis, the CPI rose 0.1% versus -0.4% prior. Meanwhile, the Bank of Canada’s Core CPI inflation, which strips out volatile categories like food and energy, climbed to 2.1% YoY in January from 1.8% in December. 

Traders reduce their bets for an interest rate cut from the Bank of Canada (BoC) in March after the CPI inflation data. The markets are now pricing in a nearly 63% chance that the BoC will hold rates steady at the March meeting, compared to 56% before the data was released.

On the USD’s front, San Francisco Fed President Mary Daly said on Tuesday that prospects of further rate cuts in 2025 remain uncertain despite an overall positive lean to US economic factors. Philadelphia Fed President Patrick Harker emphasized support for maintaining a steady interest rate policy, noting that inflation has remained elevated and persistent in recent months. 

Investors await remarks by Fed officials this week to gather more clues about the path ahead for US interest rates. Any hawkish comments from Fed policymakers could boost the Greenback in the near term.