USD/CAD consolidates near 1.3550 ahead of BoC's monetary policy decision

USD/CAD trades in a tight range near 1.3550 as investors have sidelined ahead of the BoC’s monetary policy announcement.
The BoC is expected to cut interest rates by 25 bps for the third straight time.
The US Dollar delivers a modest correction with US NFP under spotlight.

Sagar Dua FXStreet

The USD/CAD pair trades sideways near 1.3550 in Wednesday’s European trading hours. The Loonie asset struggles for direction as investors await the Bank of Canada’s (BoC) interest rate decision, which will be announced at 13:45 GMT.

Investors see the BoC cutting its key borrowing rates by 25 basis points (bps) to 4.25%. This will be the third straight interest rate cut decision by the BoC, which it started in June after gaining confidence that price pressures will return to the bank’s target of 2%. Also, the Canadian economy was struggling to bear the consequences of BoC’s restrictive interest rate stance, which forced them to start unwinding high rates.

Though the BoC is widely anticipated to cut interest rates, investors will majorly focus on the interest rate guidance and the economic outlook. Signs of deeper policy-easing this year from the monetary policy statement or BoC Governor’s Tiff Macklem press conference or both would weigh heavily on the Canadian Dollar (CAD).

Meanwhile, the US Dollar (USD) corrects slightly from fresh two-week highs as United States ISM Manufacturing PMI data for August exhibited contraction in the factory activities at a faster-than-projected pace. The PMI came in at 47.2, missed estimates of 47.5, but improved from an eight-month low of 46.8.

This week, the major trigger for the US Dollar is the US Nonfarm Payrolls (NFP) data for August, which will be published on Friday. The official employment data will influence market expectations for the Federal Reserve (Fed) interest rate cut size this month. Weak payrolls would prompt speculation for a large Fed rate cut while steady or better figures would allow the Fed to start the policy-easing process gradually.

Economic Indicator

BoC Interest Rate Decision

The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.

GBP/USD back to 1.3250, down modestly for the day

GBP/USD now comes under fresh downside pressure and recedes toward the mid-1.3200s on Tuesday, partially reversing the optimism seen at the beginning of the week. Meanwhile, Cable’s bearish tone follows the resumption of the upside traction in the Greenback, always amid the sharp rally in USD/JPY.

EUR/USD looks inconclusive in the low 1.1400s

EUR/USD alternates gains with losses in the 1.1420 region in the latter part of the NA session on turnaround Tuesday. The pair’s vacillating price action comes amid the lack of clear direction in the US Dollar. Meanwhile, market participants are expected to gear up for the upcoming key releases on the US docket and developments from the ECB Forum in Sintra.

Gold clings to daily gains beyond $4,000

Following multi-month lows near $3,950, Gold now manages to regain some composure and reclaim the area beyond the key $4,000 yardstick per troy ounce on Wednesday. Still, any meaningful recovery appears limited as a broadly firmer US Dollar and rising US Treasury yields weigh on the yellow metal.

Ethereum: Sharplink makes first treasury purchase in 2026 amid ETH's fall from grace

Ethereum treasury firm Sharplink resumed accumulation of the second-largest cryptocurrency by market capitalization last week after months on the sidelines. The Florida-based firm acquired 10,000 ETH last week at an average price of $1,611 per ETH, marking its first purchase since October. The move has pushed its holdings to 886,725 ETH worth roughly $1.4 billion at the time of writing.

Why a hawkish Bank of Japan could trigger the next Bitcoin sell-off

The Japanese Yen hits a 40-year low of 162.00 against the US Dollar, raising concerns about intervention or additional rate hikes by the Bank of Japan. BoJ may sell US Treasuries to buy back Yen, potentially pushing US bond yields higher and making Bitcoin less attractive to investors.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.