USD/CAD pair looks for direction ahead of Fed meeting minute release

Key Movers

The US dollar gave up gains during the European trading session today, which led the US Dollar Index (DXY) to slip to the 104 range. The Wall Street Journal’s MarketWatch hinted towards a slight likelihood of a rate hike in the coming three months. The Federal Reserve is set to release the minutes of the January policy meeting today and market players will be paying close attention to comments regarding the inflation outlook and the potential timing of rate cuts. Previously in January, Fed Chairman Jerome Powell hinted that a rate cut in March is unlikely. "If we saw an unexpected weakening in the labor market, that would make us cut rates sooner,” Powell further explained. The weekly Mortgage Bankers Applications (MBA) Index dropped further from last week’s -2.3% to -10.6%.

The EUR/USD pair traded fairly level during the early North American session, as the US dollar was in recovery mode, trimming some of its weekly losses. The German government updated its projections for 2024 anticipating an economic growth of 0.2%, which was lower than the 1.3% previously forecasted. Bleak global demand, geopolitical unrest, and high inflation put a dent in the economic recovery. The EUR/USD pair was last seen trading at the 1.0816 levels.

The GBP/USD pair recovered some of its losses even though Bank of England (BoE) policymaker Swati Dhingra warned about the downside risks of restrictive interest rates to the United Kingdom's living standard. This slight rebound came ahead of the uncertainty over the Fed meeting minutes, which are set to be released today. BoE Governor Andrew Bailey and other policymakers were slightly dovish while speaking before lawmakers at the UK Parliamentary Treasury Select Committee on Tuesday.