USD/CAD remains under selling pressure below 1.3650 on a softer US Dollar

• USD/CAD loses momentum near 1.3645, losing 0.20% on Monday. 
• The US Federal Reserve (Fed) is expected to leave the interest rate unchanged in its current 5.25%-5.50% range on Wednesday.
• The decline of crude oil weighs on the commodity-linked Loonie. 

The USD/CAD pair weakens to 1.3645 during the early European trading hours on Monday. The decline of the US Dollar (USD) drags the pair lower to a nearly three-week low. In the absence of top-tier economic data release from Canada, the USD price dynamics will continue to play a key role in influencing the USD/CAD pair. The Federal Open Market Committee (FOMC) interest rate decision will be the highlight on Wednesday ahead of US employment data on Friday. 

The two-day FOMC monetary policy meeting will end on Wednesday, with no change in rate expected. The tone of Fed Chair Jerome Powell and other policymakers will most likely be on the hawkish side. Fed Chair Jerome Powell noted that the US central bank needs more confidence that inflation is returning to its 2% target before cutting rates. Investors see a 25% chance that the Fed will cut interest rates in July, down from 50% last week. Additionally, financial markets have priced in nearly 60% odds that the Fed will lower the rate at its September meeting, according to the CME FedWatch tool. 

About the data, US inflation, as measured by the Personal Consumption Expenditures (PCE) Price Index, climbed to 2.7% YoY in March from 2.5% in February, firmer than the market expectation of 2.6%. The Core PCE, the Fed's preferred inflation gauge, rose by 2.8% YoY in March, above the market consensus of 2.6%. 

On the Loonie front, the Bank of Canada's (BoC) governing council members were split on how long the central bank should wait before it begins lowering interest rates when they met earlier this month. Canada's inflation rate was 2.9% in March, within the BoC's 1-3% target range, and Core inflation eased over the last few months. Markets widely expect the BoC to start cutting its policy rate in June or July. This, in turn, might weigh on the Canadian Dollar (CAD) and cap the USD/CAD's downside. 

Meanwhile, the decline of crude oil exerts some selling pressure on the commodity-linked Loonie, as Canada is the largest crude oil exporter to the United States (US).