USD/CAD reaches six-day high as BoC cut rates

• Bank of Canada cuts key rate to 3%, matching expectations, briefly boosting USD/CAD.
• BoC Governor Macklem cites trade conflict risks and cuts growth forecasts, hinting at economic challenges.
• BoC concludes Quantitative Tightening, adjusts inflation expectations, and hints at further easing in March.

The USD/CAD hit a six-day high of 1.4470 after the Bank of Canada (BoC) cut rates by 25 basis points from 3.25% to 3%, as economists widely expected. However, as market participants digest the BoC’s monetary policy statement, the pair has retraced toward 1.4430, yet it remains up 0.29%.

USD/CAD ascends to 1.4470 following BoC's decision to lower interest rates amidst cautious economic outlook

In addition, the BoC cut growth forecasts and warned Canadians, “A long-lasting and broad-based trade conflict would badly hurt economic activity in Canada,” Governor Tiff Macklem said in prepared opening remarks to a press conference.

The BoC updated its forecasts. Inflation is seen at 2.3% in 2025, and the economy is expected to grow 1.8% YoY in Q4 2024. Furthermore, announced the end of Quatitatitve Tightening (QT), and added that inflation would be around the 2% target over the next two years.

Canadian swaps market sees a 47% chance of further easing by the BoC in March.

Up next, the BoC Governor Tiff Macklem would cross newswires ahead of the Federal Reserve’s monetary policy decision.

USD/CAD Price Chart – Hourly

The USD/CAD reached a daily high, clearing the R2 pivot and peaking shy of the R3 daily pivot point. It then erased those gains and hit the R1 pivot level before stabilizing at around the current exchange rate. Momentum indicates that the BoC’s frenzy was tempered, though Macklem's presser could rock the boat.

Key resistance levels lie at 1.4471, 1.4500 and the January 20 peak at 1.4518. On further weakness, the USD/CAD could test the daily pivot point at 1.4394, followed by S1 at 1.4369.