The USD/CAD currency pair is significantly influenced by Federal Reserve rate cuts, primarily due to the U.S. dollar’s role in global markets and Canada’s economic ties to the United States. When the Fed cuts interest rates, the U.S. dollar weakens, making CAD relatively stronger, which can push USD/CAD lower. However, the extent of the movement depends on the Bank of Canada’s (BoC) monetary policy. If the BoC maintains higher interest rates while the Fed cuts, the Canadian dollar (CAD) becomes more attractive to investors seeking higher yields, strengthening further. Conversely, if the BoC also lowers rates, the impact on USD/CAD may be less pronounced. Another major factor is commodity prices, particularly oil, which heavily influences CAD’s value. A Fed rate cut can boost market confidence, driving oil prices higher, which supports CAD appreciation. However, if rate cuts signal economic weakness in the U.S., concerns over reduced demand for Canadian exports could limit CAD gains. Traders monitor Fed and BoC policies, economic indicators, and oil price movements to anticipate USD/CAD trends following interest rate decisions.