USD/CAD: BoC cautious as CAD seen choppy – TD Securities

FXStreet Insights Team FXStreet

TD Securities reports the Bank of Canada (BoC) left rates at 2.25% with a cautious tone, highlighting trade uncertainty and a soft labour market while modestly upgrading 2026 growth. The team expects no policy changes through 2026 and two hikes in 2027. They see front-end Canadian rates as too cheap and forecast USD/CAD trading choppily around current levels in Q2.

BoC on hold with conditional guidance

"The Bank of Canada held rates unchanged at 2.25% in April."

"The communique had a cautious tone, with the Bank downplaying positive growth impacts from higher energy prices and paying special attention to trade uncertainty and a soft labour market."

"Despite the Bank's apparent caution, growth forecasts for 2026 were nonetheless revised modestly higher, and in that sense to communique looks like it was implicitly designed to push back against hawkish expectations."

"We look for the Bank of Canada to stay on hold for all of 2026, with two hikes in 2027."

"We expect the USD/CAD to be choppy and trade around current levels through Q2."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD gains traction near 0.7100 as the post-Fed USD rally pauses

AUD/USD finds fresh buyers and retakes 0.7100 in the Asian session on Thursday as the US Dollar pauses its hawkish Fed-inspired rally to its highest level since late July. However, RBA rate-hike bets and hopes for US-Iran diplomatic efforts lift risk sentiment and support the risk-sensitive Australian Dollar and the major.

USD/JPY reverses a dip below 156.00 as focus shifts to BoJ

USD/JPY is reversing a brief dip below 156.00 in the Asian session on Thursday, looking to snap a three-day winning streak to a nearly two-week top set the previous day. The US Dollar pauses following the post-Fed rally to seven-week highs, while a more hawkish repricing of the BoJ's policy normalization path supports the Japanese Yen. This keeps the pair's upside limited, with the focus now shifting to the BoJ policy decision due on Friday.

Gold retakes $4,300 amid modest USD pullback but hawkish Fed caps upside

Gold climbs back above the $4,300 mark heading into the European session on Thursday, though it remains within striking distance of a six-week low touched the previous day. The US Dollar eases after touching a fresh high since late July and offers some support to the commodity. However, the Fed's hawkish outlook, along with escalating Middle East tensions, should continue to underpin the safe-haven and cap the non-yielding bullion.

XRP and XLM rebound amid mixed signals

Ripple (XRP) and Stellar (XLM) extend their recovery at the time of writing on Thursday after finding support at key technical levels. However, mixed derivatives and on-chain data for both altcoins suggest that traders remain cautious and have yet to show strong conviction in a sustained rebound. Derivatives data shows a mixed and cautious outlook among traders.

BoE expected to hold interest rate at 3.75%

The Bank of England (BoE) is set to reveal its latest monetary policy decision on Thursday, coinciding with its sixth rate-setting meeting of 2026. Market analysts expect the central bank to keep its benchmark interest rate steady at 3.75%, which should be its sixth hold in a row following December’s 25-bps rate cut.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.