USD/CAD goes from 1,4400, the focus is in the Boc and Fed policy

• The USD/CAD goes back from 1,4400 as the attractiveness of a safe refuge of the US dollar decreases after Trump withdrew the 25% tariff proposal on Colombia.
• Investors expect the Fed to maintain stable interest rates, while anticipating that the BOC cuts them in 25 basic points on Wednesday.
• The US president, Trump, is expected to impose 25% to Canada on the first day of February.

The USD/CAD pair goes back after failing to break over the round level resistance of 1,4400 in the American session on Monday. The Loonie pair falls as the US dollar (USD) goes back after its safe attractiveness decreased. The president of the United States (USA), Donald Trump, put his proposal to impose 25% tariffs on Colombia

During the weekend, Trump threatened to increase the 25% tariffs to his South American trade partner, since they refused to accept the entry of military flights from the US that transported illegal immigrants with Colombian nationality. This scenario increased the attractiveness of a safe refuge of the US dollar, since investors expected this to mark the tone for a global commercial war. However, Trump vetoed his proposal after Colombia accepted its terms, which balanced the attractiveness of the USD.

The US dollar index (DXY), which tracks the value of the dollar against six main currencies, resumes its descending path towards the minimum of seven weeks of 106.70.

From now on, investors will focus on the Federal Reserve Monetary Policy Decision (FED), which will be announced on Wednesday. The Fed is expected to announce a pause in the current policy flexibility streak and maintain interest rates without changes in the range of 4.25%-4.50%, according to the CME Fedwatch tool. Investors will pay close attention to the press conference of the president of the FED, Jerome Powell, after the announcement of the policy to obtain new orientations on interest rates.

Meanwhile, the Canadian dollar (CAD) is still widely weak, since investors fear Trump to impose 25% tariffs on Canada on February 1. The Wall Street Journal (WSJ) reported early Monday that “the impulse is growing among the advisors of the US president, Trump, to impose 25% tariffs on Mexico and Canada as soon as February 1.

Investors must prepare for significant volatility in the Loonie this week. The Bank of Canada (BOC) is scheduled to announce its first monetary policy of 2025 on Wednesday. Boc cuts interest rates at 25 basic points (BPS) at 3%.