The Canadian Dollar (CAD) holds firm against the US Dollar (USD) on Wednesday, as traders digest a largely uneventful Bank of Canada (BoC) interest decision. At the time of writing, USD/CAD is trading around 1.3570, with attention now turning to the Federal Reserve’s (Fed) interest rate decision due at 19:00 GMT.
The BoC left its benchmark interest rate unchanged at 2.25%, in line with market expectations, and offered little in the way of fresh guidance. In its Monetary Policy Statement, the BoC said monetary policy remains focused on keeping inflation close to the 2% target while helping the economy navigate a period of structural adjustment. Governing Council judged that the current policy rate “remains appropriate.”
However, officials stressed that uncertainty is heightened, that risks are being monitored closely, and that the central bank stands ready to respond if the outlook changes.
The accompanying Monetary Policy Report underscored that the Canadian economy continues to face headwinds from elevated trade uncertainty and US tariffs, while growth is expected to remain modest. The BoC now expects Gross Domestic Product (GDP) to rise by 1.1% in 2026 and 1.5% in 2027.
On inflation, policymakers forecast CPI to average 2% in 2026, slightly below the previous 2.1% estimate, and 2.1% in 2027, unchanged from the October outlook.
Despite the muted BoC outcome, USD/CAD found some support as the US Dollar staged a modest rebound across the board. The Greenback drew fresh bids after comments from US officials helped stabilize sentiment following recent heavy selling.
US Treasury Secretary Scott Bessent said the United States maintains a “strong Dollar” policy. Bessent also said Washington is “absolutely not” intervening in the Dollar-Yen pair at present. The comments came a day after President Donald Trump said he is not concerned about the recent decline in the US Dollar.
The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 96.40, rebounding modestly after hitting a four-year low of 95.56 on Tuesday.
Looking ahead, market focus now shifts squarely to the Fed’s interest rate decision. While no change in rates is expected, traders will closely watch Chair Jerome Powell’s tone and guidance for clues on the timing and pace of potential cuts later this year.
Source: https://www.fxstreet.com/news/usd-cad-trades-flat-after-boc-keeps-rates-unchanged-fed-decision-in-focus-202601281610
