• USD/CAD stays sideways below 1.3600 with the Fed policy taking center stage.
• Traders remain divided over Fed potential rate cut size.
• Firm speculation for BoC aggressive policy-easing cycle weighs on the Canadian Dollar.

The USD/CAD pair trades in a tight range below the round-level resistance of 1.3600 in Friday’s North American session. The Loonie asset struggles for direction with investors focusing on the Federal Reserve’s (Fed) monetary policy meeting, which is scheduled for Wednesday.

The Fed is almost certain to start reducing interest rates in Wednesday’s meeting as officials are worried about deteriorating labor market conditions, with growing confidence that inflationary pressures will sustainably return to the bank’s target of 2%.

Meanwhile, traders remain split over the Fed's likely interest rate cut size. The CME FedWatch tool shows that the probability of the Fed reducing interest rates by 50 basis points (bps) to 4.75%-5.00% in September has increased sharply to 45% from 28% a day ago.

On the data front, the University of Michigan (UoM) has reported higher-than-expected preliminary Consumer Sentiment Index (CSI) data for September. The sentiment data rose to 69.0 from expectations of remaining almost steady at 68.0.

In the Canadian region, a decent recovery in the Oil price fails to uplift the Canadian Dollar (CAD). The currency remains weak as the Bank of Canada’s (BoC) policy-easing cycle is expected to be more aggressive than other central bankers from G7 nations. The BoC has already slashed its key borrowing rates by 75 bps and is expected to cut them further in the remainder of the year.