USD/CAD hovers near 1.4050 as the Bank of Canada lifts rates to 2.5%, but the loonie fails to gain traction ahead of the Fed decision.

The Canadian dollar barely moved during U.S. trading on Wednesday, staying around 1.4050 against the greenback. Even though the Bank of Canada (BoC) delivered a widely expected 25‑basis‑point increase to 2.50%, the loonie could not translate the policy shift into stronger gains.

BoC’s stance and forward guidance

• The governing council said the hike was needed to curb the risk that high energy prices would spill over into broader inflation.
• BoC left the door open for further tightening, noting “uncertainties” and the need to proceed carefully.
• Governor Tiff Macklem warned that inflation is still not fully contained and that US trade and Middle‑East developments could alter the outlook.

Inflation outlook and growth implications

• Updated forecasts show CPI rising to about 3.5% by year‑end and averaging 3% in 2027, a full point above the July outlook.
• The policy rate, even after the hike, is considered low enough not to restrain growth, according to Macklem.
• The central bank reiterated its commitment to price‑stability confidence for Canadians.

What traders are watching next

• The Federal Reserve’s policy decision at 18:00 GMT, with the DXY near two‑week highs around 102.40.
• Markets expect the Fed to hold rates steady at 3.75%‑4.00% but are eyeing Chair Jerome Powell’s tone for clues on a possible December hike, which the CME FedWatch tool shows an 85% probability.
• A hawkish Fed hold could push USD/CAD higher, while a dovish stance may curb bets on a year‑end rate increase and weigh on the dollar.

Related news

• Fed holds rates steady, bitcoin barely moves as December hike looms
• Gold slips toward $4,000 as oil above $100 clouds Fed outlook
• Obr downgrades uk growth forecast for 2027 despite healey budget
• Bitcoin and gold hold near key levels ahead of Fed decision

More from ITF

• ITF trading signals for gold and forex
• Copy verified traders with ITF Copy Trading
• This week’s economic calendar

This article is compiled from international market news for information only. It is not investment advice.