Canadian Dollar struggles to gain traction despite BoC rate hike
- USD/CAD holds steady as the Canadian Dollar struggles to gain traction after the BoC rate hike.
- The BoC raised interest rates by 25 bps to 2.50%, leaving the door open to further tightening.
- Attention shifts to the Fed’s interest rate announcement, with December hike expectations in focus.
USD/CAD is little changed during American trading hours on Wednesday as the Canadian Dollar (CAD) struggles to benefit from a widely anticipated Bank of Canada (BoC) interest rate hike. At the time of writing, the pair trades around 1.4050 after swinging in both directions in the immediate reaction to the decision.
The BoC raised its policy rate by 25 basis points (bps) to 2.50%. Governing Council said the increase was needed “to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services.”
The central bank also left the door open to additional hikes, saying, “There could be a need to increase the policy rate further, but given uncertainties, the Governing Council agreed to proceed carefully.” The BoC stressed that “the Bank remains committed to maintaining Canadians’ confidence in price stability.”
At the post-meeting press conference, BoC Governor Tiff Macklem said, “Hiking will limit pass-through of higher oil prices,” adding that inflation was “looking less likely to be well-contained.”
Macklem noted that the “policy rate, even with this hike, is low enough that it is not restraining growth.” However, he stressed that “there is no predetermined path for rates,” warning that “uncertainty in US trade and the Middle East could change outlook.”
The updated projections show a longer path back to the 2% inflation target. The BoC expects Consumer Price Index (CPI) inflation to rise to around 3.5% by year-end and average 3% in 2027, a percentage point above its July forecast, before easing to 2% in mid-2028.
Attention now turns to the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT. The US Dollar is holding firm ahead of the decision, with the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, hovering near two-week highs around 102.40.
Policymakers are widely expected to leave interest rates unchanged at 3.75%-4.00% after September’s 25-bps hike. With inflation risks still tilted to the upside, traders will closely watch Fed Chair Warsh’s remarks for clues on a December increase, which markets see as 85% likely, according to the CME FedWatch Tool.
A hawkish hold could support the US Dollar and push USD/CAD higher. A less hawkish tone, however, could prompt traders to scale back December rate hike bets and weigh on the Greenback.
Canadian Dollar Price Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | 0.10% | 0.14% | 0.01% | -0.08% | 1.25% | 0.12% | |
| EUR | 0.06% | 0.16% | 0.21% | 0.07% | -0.02% | 1.31% | 0.18% | |
| GBP | -0.10% | -0.16% | 0.04% | -0.09% | -0.19% | 1.15% | 0.00% | |
| JPY | -0.14% | -0.21% | -0.04% | -0.14% | -0.22% | 1.09% | -0.04% | |
| CAD | -0.01% | -0.07% | 0.09% | 0.14% | -0.09% | 1.23% | 0.11% | |
| AUD | 0.08% | 0.02% | 0.19% | 0.22% | 0.09% | 1.34% | 0.20% | |
| NZD | -1.25% | -1.31% | -1.15% | -1.09% | -1.23% | -1.34% | -1.11% | |
| CHF | -0.12% | -0.18% | -0.01% | 0.04% | -0.11% | -0.20% | 1.11% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Author
Vishal Chaturvedi
FXStreet
I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.
