The USD/CAD pair slipped to 1.3825 on Thursday, retreating from its recent post-Bank of Canada (BoC) highs as the US dollar softened amid market reassessments of the Federal Reserve’s policy path. After a brief climb earlier in the week, the pair’s pullback reflects a shift in sentiment toward a less aggressive stance on interest rates from the U.S. central bank.
Following the Bank of Canada’s decision to hold interest rates steady, the Canadian dollar initially weakened, pushing the USD/CAD to a recent high. However, the renewed weakness in the U.S. dollar—driven by easing U.S. Treasury yields and lower inflation expectations—has reversed the pair’s upward momentum. Market participants now seem to be scaling back expectations of further rate hikes from the Federal Reserve, which has led to a more cautious outlook on the greenback.
The Canadian dollar has found some support from stable oil prices, a key factor for the commodity-linked currency. Additionally, the BoC’s cautious approach to monetary policy appears to be giving the loonie room to stabilize as investors weigh both domestic and global economic conditions.
As the USD continues to lose steam, attention will likely shift to upcoming economic data releases, including U.S. employment figures and Canadian GDP data. These reports could provide further clarity on the central banks’ next moves, particularly as the market remains sensitive to any signals that could impact rate expectations.
With global market volatility persisting, the USD/CAD’s trajectory will be closely tied to the evolving outlook on monetary policy from both sides of the border. Traders are likely to remain cautious as they assess the potential for continued divergence between the BoC and Fed policy decisions.
