Hawkish FOMC Minutes Lift USD as USD/CAD Nears Two-Week High

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar        1.3560-1.3810

Euro                1.5990-1.6240

Sterling           1.8310-1.8560

WTI Oil (opening level) $65.93

The CAD/USD is opening at 1.3689 ( 0.7305 )

USD/CAD trading near a two-week high and looks to extend the recent move up witnessed over the past week or so. Meanwhile, bulls await a sustained strength and acceptance above the 1.3700 mark before placing fresh bets amid mixed fundamental cues.

The USD preserves the previous day's strong gains and stands firm near its highest level in over a week on the back of less dovish FOMC Minutes, which, in turn, acts as a tailwind for the USD/CAD pair. Meanwhile, Crude Oil prices gain some follow-through positive traction amid renewed US-Iran tensions, underpinning the commodity-linked CAD and capping gains for the currency pair.

Headlines

• Federal Reserve officials appeared wary of cutting interest rates at their January meeting, with several suggesting the central bank may need to raise rates if inflation remains high. The minutes of the meeting showed most officials believed last year's labor market weakness was fading, and that the risk of more persistent inflation remained.
• Australia reported strong labour market data for January, as the overall unemployment rate stayed steady at 4.1% versus an expected rise to 4.2%. Employment change on the month was strong for a second consecutive month at +50.5k.
• UK headline inflation eased to 3.0% in January 2026, the lowest since March 2025, driven by slower transport and food price rises. Core inflation fell to 3.1%, its lowest since August 2021, although an even steeper drop to 3.0% was expected.
• Japan's core machinery orders surged 19.1% in December 2025 to ¥1,052.5 billion, beating expectations after an 11% drop in November. Manufacturing orders rose 25.1%, non-manufacturing 8.2%. Significant rises were seen in petroleum, metals, real estate, and machinery industries. Private-sector orders climbed 16.8% year-on-year.
• According to Axios, Trump has escalated tensions with Iran, raising worries about a potential major conflict in the region.
• US housing starts rose 6.2% in December 2025 to 1.404 million, exceeding forecasts. Single-family starts increased, and multi-family starts surged. Activity rose in the West, Northeast, and Midwest but fell in the South. In 2025, 1,358,700 units were started, a 0.6% decline from 2024.
• US manufacturing output rose 0.6% in January 2026, surpassing expectations. Durable goods increased 0.8%, including motor vehicles, while nondurable goods went up 0.4%. Capacity utilization hit 75.6%, below the long-term average.
• US durable goods orders fell 1.4% in December 2025, mainly due to transportation equipment. Orders excluding transportation rose 0.9%, while those excluding defense fell 2.5%. Non-defense capital goods excluding aircraft rose 0.6%. In 2025, orders increased 7.8% year-over-year.
• The NY Fed's business activity index dropped to -25.7 in February 2026, showing sharp contraction. Employment fell, wage growth rose, and supply worsened. Costs stayed high, but firms expect modest improvement in six months.

Key Points

• Equities: US equities rose on rate-cut hopes and AI demand, Europe edged higher on defence strength, Asia steadied pre-holiday.
• Volatility: VIX near 20, Fed minutes hawkish, PCE ahead, puts remain bid
• Digital Assets: Bitcoin and Ethereum ranging, IBIT and ETHA softer, crypto macro-driven, PCE key catalyst
• Fixed Income: US treasury yields back up on FOMC minutes, weak 20Y auction. Japan’s longest bonds in strong demand.
• Currencies: USD firms on FOMC minutes and higher US yields. AUD rallies on latest jobs data. JPY weakens again.
• Commodities: Gold pauses at USD 5,000 as Fed caution offsets Middle East tensions, while Brent moves back above USD 70