**USD/CAD Forecast Ahead of Fed and BoC Decisions: What Traders Should Watch For**
*Based on the original analysis by Crispus Nyaga, Invezz.com, with expanded insights.*
The USD/CAD currency pair has been exhibiting increased volatility as markets weigh forthcoming monetary policy decisions from the U.S. Federal Reserve (Fed) and the Bank of Canada (BoC). These decisions are poised to significantly shape the near-term direction of the pair, particularly in the context of diverging economic conditions and central bank strategies in both countries. As of the last week in July 2025, the USD/CAD exchange rate has shown signs of stability after recovering from a dip to about 1.3600 earlier this month.
This article provides a detailed forecast and technical analysis of the USD/CAD pair ahead of the key central bank announcements. In addition to reflections from the original article on Invezz by Crispus Nyaga, we incorporate broader macroeconomic data, expert perspectives, and other relevant market indicators to expand the scope of the forecast.
## Overview of USD/CAD Performance
Recent weeks have seen the USD/CAD pair moderate in its movement following a short-term correction. The currency has been influenced by a combination of weaker economic indicators in the Canadian economy, expectations regarding interest rate trajectories, and overall market sentiment driven by commodity prices — especially oil, which plays a key role in Canada’s export economy.
Key highlights of recent USD/CAD movement:
– The pair dropped to a low of around 1.3600 earlier in July 2025 due to a mix of soft U.S. inflation data and relatively firmer Canadian GDP numbers from Q2.
– It has since rebounded toward the 1.3730 level, buoyed by a more hawkish Fed tone and lower-than-expected Canadian retail sales.
– The pair remains within a broad channel exhibiting both longer-term consolidation and shorter-term bullish reversal signals.
## Fundamental Drivers: U.S. Perspective
### 1. Upcoming Federal Reserve (Fed) Decision
The Federal Reserve is scheduled to announce its interest rate decision next week. After holding its benchmark rate steady at a target range of 5.25%-5.50% through most of 2024 and 2025, recent comments from Fed Chair Jerome Powell and other FOMC members suggest that no major rate cuts are in the immediate pipeline. The Fed has maintained a cautious stance, closely watching inflation and labor market conditions.
Recent U.S. economic indicators to consider:
– June and July 2025 Consumer Price Index (CPI) reports both showed core inflation remaining sticky, around 3.2% year-over-year.
– The U.S. economy added 165,000 jobs in June 2025, slightly below expectations but still in line with a moderately tight labor market.
– The Q2 GDP grew at an annualized rate of 1.9%, maintaining the slow but positive growth narrative.
– The University of Michigan’s consumer sentiment index improved slightly, indicating resilience among American households.
Expectations from the Fed:
– Analysts from JPMorgan Chase and Goldman Sachs forecast that the Fed will maintain current rates through the third quarter of 2025.
– Traders are now pricing in only one rate cut by December 2025, compared to three cuts expected at the start of the year.
– Any hawkish surprise (such as signaling one or no cuts in the next 6 months) could boost the U.S. dollar.
### 2. Oil Prices and the U.S. Dollar
Although oil prices influence the Canadian dollar more directly, their impact on inflation and U.S. energy policy can also affect USD strength. As of late July 2025, WTI crude oil is trading at around $81 per barrel, showing stability after some mid-year fluctuations due to geopolitical tensions in the Middle East and supply cuts from OPEC+.
A rise in oil prices can indirectly weigh on the USD if inflation concerns rise alongside energy costs,
Read more on USD/CAD trading.