USD/CAD trades sideways as BoC policy takes centre stage

USD/CAD consolidates as investors await BoC’s policy decision, which will be announced on Wednesday.
The BoC is expected to cut interest rates by 50 bps to 3.75%.
The uncertainty over US presidential elections keeps market sentiment jittery.

Sagar Dua FXStreet

The USD/CAD pair consolidates in a tight range above the round-level support of 1.3800 in Tuesday’s European session. The Loonie pair trades back and forth, with investors focusing on the Bank of Canada’s (BoC) interest rate decision, which will be announced on Wednesday.

The BoC is expected to reduce its key borrowing rates by 50 basis points (bps) to 3.75%. This would be the fourth straight interest rate cut by BoC in a row. However, the rate-cut size will be larger than usual due to consistently rising jobless rate and slowing inflationary pressures. In September, the Canadian Unemployment Rate decelerated to 6.5% from 6.6% in August but is still higher than 5%, which is often considered a full employment level.

The Canadian economy needs fresh stimulus to boost overall spending and employment levels, which makes more rate cuts as appropriate. Meanwhile, a tight competition between former US President Donald Trump and current Vice President Kamala Harris for presidential elections, which are two weeks away has also kept the Canadian Dollar (CAD) on tenterhooks. The victory of Trump would result in higher import tariffs, which would undermine the currencies of the United States’s (US) trading partners, such as Canada.

Meanwhile, a firm US Dollar (USD) has failed to strengthen the Loonie pair. The US Dollar’s outlook is upbeat as investors expect a gradual rate-cut cycle from the Federal Reserve (Fed) in the remainder of the year. According to the CME FedWatch tool, the Fed is expected to cut interest rates by 25 basis points (bps) in November and December. On the economic front, investors will pay close attention to the flash S&P Global PMI data for October, which will be published on Thursday.

(This story was corrected on October 22 at 13:15 GMT to say, in the last paragraph, that a firm US Dollar has failed to strengthen the Loonie pair, not that a firm US Dollar has also weighed on the Loonie pair.)

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.

AUD/USD seems vulnerable near 0.6800, 10-month low amid bullish USD

AUD/USD languishes near a 10-month low during the Asian session on Friday, awaiting a break below 0.6800 before the next leg up amid a bullish US Dollar. Firming Fed rate-hike expectations, along with fading hopes for US-Iran diplomacy, help the USD hold gains at its highest level since April 2025. Moreover, the RBA’s dovish tilt undermines the Aussie and backs the case for further losses.

USD/JPY bulls turn cautious near 160.00 amid intervention risks

USD/JPY enters a bullish consolidation phase around its highest level since early September as bulls turn cautious amid intervention risk near 160.00. Meanwhile, the downside seems cushioned as the wide US-Japan interest rate gap keeps the Yen carry trade active. Furthermore, the possibility of a jumbo Fed rate hike and Middle East uncertainties hold the US Dollar near a 19-month top, supporting the currency pair.

Gold remains on the back foot below $3,900

Gold now alternates gains with losses below the $3,900 mark per troy ounce on Friday. The precious metal struggles to regain traction amid the firmer US Dollar, mixed US Treasury yields and expectations of further tightening by the Fed at its December meeting.

Bitcoin just posted five straight losing weeks, and the storm may not be over yet

Bitcoin is struggling to find support, slipping below $70,000 as multiple headwinds threaten to push the Crypto King lower. The much-anticipated “Uptober” rally failed to materialize, with persistent selling pressure and widespread liquidations instead reinforcing the “Rektober” narrative.

Week ahead – Fed Minutes, inflation data and Nvidia earnings to guide investors

Fed minutes may add to hawkish tone as bets of 50-bps hike grow. Nvidia to report earnings as bar to impress high after spy scandal. Trade and geopolitics to be focal point of Trump-Xi summit.

Gold hit its lowest level of 2026 near $3,850

Gold (XAU/USD) attempts to stabilize around $3,890 on Friday after falling to $3,852 on Thursday, its lowest level since October 2025. The precious metal has lost more than 4% this week, as investors increasingly anticipate further monetary tightening from the Federal Reserve (Fed). The latest decline reflects a sharp change in market expectations.