USD/CAD closes in on 1.2500 as DXY climbs to 92.00 ahead of FOMC
- USD/CAD is trading at fresh daily highs, approaches 1.2500.
- US Dollar Index test 92.00 ahead of FOMC announcements.
- Rising US Treasury bond yields continue to support the USD.
The USD/CAD pair continued to edge higher during the American trading hours and touched a fresh daily high of 1.2491. As of writing, the pair was up 0.35% on a daily basis at 1.2487.
USD preserves bullish momentum on rising T-bond yields
The broad-based USD strength ahead of the FOMC's policy announcements seems to be fueling USD/CAD's climb on Wednesday. Supported by a 2.7% increase in the 10-year US Treasury bond yield, the US Dollar Index is up 0.13% on the day at 91.99.
Although the Fed is widely expected to keep its policy rate and asset-buying strategy unchanged, the updated Economic Projections will provide fresh insight into policymakers' view on long-term interest rates and inflation expectations.
Previewing the FOMC meeting, "markets will watch Fed Chair Jerome Powell's news conference closely for any hints on future policy changes, especially in regard to Fed asset purchases," said UBS analysts. "In particular, markets have been looking for Powell to push back against the recent rise in Treasury yields. So far he hasn't, but today is another opportunity to do so."
Federal Reserve Preview: Forecast from 19 major banks.
On the other hand, the data from Canada showed that inflation, as measured by the Core Consumer Price Index (CPI), declined to 1.2% in February from 1.6% in January. This reading came in lower than the market expectation of 1.4% but failed to trigger a noticeable market reaction.
Technical levels to watch for