USD/CAD wobbles around 1.4400 as investors shift focus to BoC-Fed monetary policy

• USD/CAD oscillates around 1.4400 as investors await key monetary policy decisions by the BoC and the Fed.
• The Fed is expected to leave interest rates at their current levels amid uncertainty over Trump's economic policies.
• The BoC would reduce interest rates by 25 bps to trim upside risks of price pressures remaining persistently lower.

The USD/CAD pair trades in a tight range around 1.4400 in Thursday's European session. The Loonie pair consolidates as investors shift their focus to the monetary policy meetings of the Federal Reserve (Fed) and the Bank of Canada (BoC), which are scheduled on Wednesday.

According to the CME FedWatch tool, the Fed is almost certain to keep interest rates unchanged in the range of 4.25%-4.50%. Traders expect the Fed to keep borrowing rates steady on the assumption that United States (US) President Donald Trump's economic policies will be pro-growth and inflationary for the economy.

Trump has threatened to raise 25% tariffs on China and Mexico and 10% on China. Also, he has signaled plans to impose tariffs on the Eurozone too, but no further details have been provided. Trump mentioned in the inauguration ceremony that funds from tariffs would be utilized to bear the burden of tax cuts on the Treasury. "Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens," Trump said.

An inflated-environment with a strong economic outlook would force Fed officials to support keeping interest rates elevated for longer.

Meanwhile, the Bank of Canada (BoC) is expected to unwind its policy restrictiveness further to boost economic growth and absorb growing risks of inflation undershooting the central bank's target of 2%. The BoC reduced its interest rates by 175 basis points (bps) to 3.25% last year. Next week, the BoC is expected to cut its borrowing rates by 25 bps to 3%.

BoC's dovish interest rate decision would further dampen the already weak appeal of the Canadian Dollar (CAD). The Canadian currency is already facing pressure as Trump is poised to impose hefty tariffs.