USD/CAD holds gains at 1.3770 ahead of the Fed and BoC decisions

• The US Dollar holds gains against a weaker Loonie, following a four-day rally.
• Later on, the day US ADP employment and the preliminary GDP figures will frame the Fed's decision.
• The Bank of Canada is expected to stand pat, but recent data points to more easing before the year-end.
  

The Greenback steadies near recent highs against the Canadian Dollar following a four-day rally, with investors watching from the sidelines ahead of the monetary policy decisions by the Federal Reserve and the Bank of Canada due later on the day.

The pair is trading right above 1.3770 during Wednesday's early European session, consolidating gains after rallying nearly 1.5% from last week's lows at 1.3575. Strong US macroeconomic data and the trade deals between the US and some of its major trade partners have restored confidence in the US Dollar.

US ADP employment and GDP will frame the Fed's decision

US JOLTS Job Openings data suggested that the labour market is cooling, and investors will be looking at the ADP report, due later on the day, to confirm that view.

Also on Wednesday, the Preliminary US GDP is expected to show that the US economy experienced a significant recovery, showing a 2.4% annualised growth after the 0.5% contraction seen in the previous quarter.

Suppose these figures are confirmed and the ADP meets market forecasts and shows a significant rebound in June. In that case, the Fed might have further reasons to keep interest rates unchanged until the economic consequences of Trump's tariffs are evident.  

The Bank of Canada is also expected to leave rates on hold, but the fundamental background is quite different in this case. Inflation remains below the 2% level, and the labour market has softened, which might prompt the bank to deliver a "dovish hold" that would increase negative pressure on the Loonie.