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Why Is USD/CAD Climbing Toward 1.4200? Key Factors Driving the Pair Before FOMC Minutes | USDCAD Analysis & Market Outlook

The usdt trc20 contract addressUSD/CAD currency pair continues its upward trajectory, hovering around 1.4195 during Tuesday's late trading session in North America. This movement reflects shifting market expectations ahead of Wednesday's release of Federal Open Market Committee (FOMC) meeting minutes, coupled with fresh inflation data from Canada.Recent economic indicators from Statistics Canada revealed a modest uptick in consumer prices. January's annual CPI inflation rate reached 1.9%, slightly above December's 1.8% reading and aligning with market forecasts. Monthly figures showed a 0.1% increase following December's 0.4% contraction. More significantly, the Bank of Canada's core inflation measure, which excludes volatile components like energy and food, accelerated to 2.1% annually from 1.8% in the previous month.These inflation developments have prompted traders to reassess monetary policy expectations. Market participants now see approximately 63% probability of the Bank of Canada maintaining current interest rates at its March meeting, up from 56% before the inflation report. This recalibration suggests reduced anticipation of near-term monetary easing from Canada's central bank.Across the border, Federal Reserve officials have maintained a cautious tone regarding policy adjustments. San Francisco Fed President Mary Daly emphasized ongoing uncertainty about potential rate reductions in 2025, despite generally favorable economic conditions. Philadelphia Fed President Patrick Harker reinforced this stance, advocating for sustained restrictive policies given persistent inflationary pressures.The currency market's focus now shifts to forthcoming commentary from Fed representatives and Wednesday's FOMC minutes release. These communications may provide critical insights into the timing and extent of future US monetary policy adjustments. Market participants will scrutinize any indications of prolonged higher rates, which could further strengthen the US dollar against its Canadian counterpart.Technical analysts note that the USD/CAD pair continues to trade within its established range, with the current upward movement testing resistance levels. Fundamental factors, particularly divergent monetary policy expectations between the Federal Reserve and Bank of Canada, appear to be driving near-term price action. Traders remain attentive to potential catalysts that could break the pair out of its recent trading band.

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