The USD/CAD pair is trading around 1.3820 during the Asian session on Wednesday, as traders await the Bank of Canada (BoC) interest rate decision later today. Market expectations suggest a potential 50 basis point rate cut, marking the third consecutive reduction and the first of this magnitude, driven by decreasing price pressures and a significant decline in labor growth and household spending.
Consumer inflation dropped to 1.6% in September, the lowest in over three years, aligning with the BoC’s 2% target for the second straight month. However, TD Securities forecasts a 25 basis point cut to 4.00%, arguing that larger cuts are unnecessary to maintain inflation targets.
The downside for the Canadian Dollar (CAD) may be offset by rising crude oil prices, with West Texas Intermediate (WTI) trading around $71.40 per barrel. The US Dollar (USD) remains strong, supported by rising Treasury yields and a robust US Dollar Index (DXY) near a two-month high at 104.20. Current market sentiment indicates a 91% probability of a 25-basis-point cut from the Federal Reserve, with no larger cuts expected.
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