Forex News
- Gold pauses its two-day rebound as traders await the Fed’s interest rate decision.
- The Fed is expected to hold rates steady, with traders looking for clues on a December hike.
- XAU/USD remains below key daily moving averages, with immediate support at $4,000-$3,950.
Gold (XAU/USD) consolidates losses on Wednesday as investors await the Federal Reserve’s (Fed) monetary policy announcement, due at 18:00 GMT. A modest pullback in Oil prices helped bullion recover from its lowest levels since July over the past two days. However, renewed gains in Oil prices and a steady US Dollar (USD) are limiting further upside.
At the time of writing, XAU/USD trades around $4,037, down 0.57% on the day. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 102.33 after reaching a fresh two-week high of 102.49 earlier in the day.
Oil prices rebound after the Wall Street Journal reported that Washington had warned Gulf states of a possible military operation against Iran after the US midterms. West Texas Intermediate (WTI) trades around $102.60 a barrel, up 3% on the day.
Alongside the rise in Oil, US Treasury yields recover from recent lows, with the 10-year yield climbing back above 5%, adding pressure on non-yielding Gold.
Higher energy costs have kept inflation pressures elevated since the Middle East war erupted in late February, prompting major central banks, particularly the Fed, to tighten monetary policy.
The US central bank raised interest rates by 25 basis points (bps) in September and signalled another increase before year-end, reaffirming its commitment to returning inflation to its 2% target.
Policymakers are widely expected to keep interest rates unchanged at 3.75%-4.00% at the October meeting, while traders price in an 85% probability of a hike in December, according to the CME FedWatch Tool.
Analysts at ABN Amro argue that recent US economic data give the Fed room to pause for now. They note that, “combined with the recent softer PCE readings, the labour data remove much of the pressure to hike immediately,” allowing policymakers to “afford another six weeks to assess whether the latest inflation strength represents persistent pressure or another temporary bump.”
With a pause largely anticipated, guidance on the policy outlook could trigger a stronger market reaction than the decision itself. If policymakers signal that further rate hikes remain on the table, the US Dollar could strengthen further, putting Gold’s $4,000 support level at risk.
Higher interest rates increase the opportunity cost of holding the non-yielding metal. Conversely, a less hawkish tone could weigh on the Greenback and give bullion room for a short-term relief rally.
Technical analysis: XAU/USD remains bearish below key daily SMAs
On the daily chart, XAU/USD maintains a bearish near-term bias as it trades below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), keeping sellers in control. The Relative Strength Index (RSI) at 39 points to weak buying momentum, while the Moving Average Convergence Divergence (MACD) remains in negative territory, suggesting that downside pressure persists.
On the upside, initial resistance stands at the 100-day SMA near $4,218, followed by the 50-day SMA at $4,278. A stronger recovery could bring the horizontal resistance at $4,400 into focus, ahead of the 200-day SMA around $4,500.
On the downside, the $4,000-$3,950 zone offers immediate support. A break would open the door to a deeper retracement, while recovery attempts are likely to struggle as long as price trades below the clustered daily moving averages.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- USD/CHF holds near two-week highs as traders await the Fed’s interest rate announcement.
- Hawkish Fed expectations and bets on a December rate hike keep the US Dollar supported.
- The Swiss Franc remains under pressure as the SNB’s low interest rates favour carry trades.
USD/CHF consolidates modest gains on Wednesday ahead of the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT. The pair remains on the front foot for a fourth consecutive day as traders favour higher-yielding currencies, leaving the Swiss Franc (CHF) under pressure. At the time of writing, USD/CHF trades around 0.8303, near two-week highs.
The Fed is widely expected to leave interest rates unchanged at 3.75%-4.00% following September’s 25-basis-point hike. Traders will look to the policy statement and Chair Warsh’s press conference for clues on another rate hike in December, with markets pricing in an 85% probability, according to the CME FedWatch Tool.
The US central bank is likely to maintain a hawkish stance as the Middle East energy shock threatens to keep inflation above its 2% target for longer. Oil prices have rebounded after two days of losses following a Wall Street Journal report that Washington had warned Gulf states of a possible military operation against Iran after the US midterm elections.
The US Dollar is holding firm before the announcement, with the US Dollar Index (DXY), which tracks the Greenback against six major currencies, hovering around 102.40, near two-week highs.
Strategists at Brown Brothers Harriman argue that the upcoming FOMC decision is unlikely to close the door on further tightening, with “the FOMC vote split and Fed Chair Kevin Warsh’s assessment of inflation” expected to “keep a December hike in play.” They “lean towards a 9-3 vote to hold, with Beth M. Hammack, Neel Kashkari, and Lorie K. Logan dissenting in favor of a 25bps hike, as they did in July,” underscoring persistent hawkish voices on the Committee.
Warsh is also “likely to reiterate that inflation remains too high and underlying inflation pressures have yet to improve meaningfully,” BBH adds. The bank concludes that “bottom line, robust US economic activity and rising price pressures reinforce the Fed’s hawkish bias, keeping rate differentials supportive of USD.”
On the Swiss side, the Swiss National Bank’s (SNB) policy rate remains at 0%, among the lowest in the world, leaving the Franc at a yield disadvantage and making it an attractive funding currency for carry trades. The bar for an SNB rate hike appears relatively high, as inflation remains within its 0%-2% price stability range.
Swiss Franc Price Today
The table below shows the percentage change of Swiss Franc (CHF) against listed major currencies today. Swiss Franc was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.09% | 0.03% | 0.19% | -0.12% | -0.17% | 1.10% | 0.14% | |
| EUR | 0.09% | 0.12% | 0.28% | -0.03% | -0.09% | 1.19% | 0.24% | |
| GBP | -0.03% | -0.12% | 0.15% | -0.14% | -0.21% | 1.03% | 0.12% | |
| JPY | -0.19% | -0.28% | -0.15% | -0.31% | -0.35% | 0.91% | -0.05% | |
| CAD | 0.12% | 0.03% | 0.14% | 0.31% | -0.05% | 1.22% | 0.27% | |
| AUD | 0.17% | 0.09% | 0.21% | 0.35% | 0.05% | 1.28% | 0.32% | |
| NZD | -1.10% | -1.19% | -1.03% | -0.91% | -1.22% | -1.28% | -0.93% | |
| CHF | -0.14% | -0.24% | -0.12% | 0.05% | -0.27% | -0.32% | 0.93% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Swiss Franc from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CHF (base)/USD (quote).
- GBP/USD hovers near 1.3300, extending its four-day losing streak.
- UK Chancellor pledges to eliminate current budget deficit within three years.
- December Fed hike odds reach 85% as markets await Warsh's guidance.
The Pound Sterling retreats for the fourth consecutive day versus the US Dollar, down 0.02% as investors brace for the Federal Reserve policy decision and also digest the UK’s Autumn Budget. The GBP/USD trades near 1.3300, barely unchanged.
GBP/USD weighed as investors await the Fed decision despite Britain's fiscal discipline pledges
UK finance minister John Healey presented the budget “built on fiscal discipline which matches immediate action today, with clear direction for the future.” He said that the Office for Budget Responsibility (OBR) revealed that the war in the Middle East complicates forecasts, and that this budget “puts us on track to eliminate the current budget deficit and get Britain’s finances into the black within 3 years.”
This barely moved GBP/USD, which remained under pressure amid rising tensions in the Middle East.
In the US, the focus is on the Federal Reserve’s monetary policy decision. Money markets expect a nearly 91% chance that Warsh and company will hold rates unchanged, though eyes will be on his press conference and the guidance he could provide on the foreseeable future.
Towards the end of the year, the swaps market had priced in 21 basis points of tightening, or an 85% chance that the Fed will hike in the December meeting, according to Prime Terminal.
Along with the Fed’s decision, the release of US Gross Domestic Product (GDP) figures for Q3, and the Fed’s preferred inflation gauge, the Core PCE, could influence the GBP/USD direction towards the end of the month.
GBP/USD Price Forecast: Technical outlook
In the daily chart, GBP/USD trades at 1.3303, holding below a dense cluster of simple moving averages around 1.3390 and sustaining a bearish near-term bias. The pair has slipped under the upward trend structure, with the latest touch on the former support line near 1.3360 now acting as resistance, while a downward-sloping trend line that previously capped price around 1.3255 has turned into nearby support. The Relative Strength Index (14) at about 48 sits just under the neutral midline, hinting at waning bullish momentum and leaving the downside exposed unless buyers can reclaim the overhead technical barriers.
On the topside, initial resistance is seen at the broken upward trend line around 1.3360, followed by a key confluence zone where the 50-, 100- and 200-day simple moving averages cluster near 1.3390; a daily close above this area would ease immediate downside pressure. Further up, a descending trend line near 1.3544 precedes another structural cap from an older rising trend line around 1.3606. On the downside, first support is provided by the repurposed downward trend line around 1.3255; a break below this floor would open the way for a deeper pullback toward previous lows not shown by the current indicator set.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Governor Tiff Macklem took questions from reporters, offering markets a clearer sense of how the central bank was thinking. His remarks followed the widely expected decision to hike the policy rate by 25 bps to 2.50%.
BoC's press conference takeaways
We are seeing more investment in the energy sector.
Even with this hike, the policy rate is low enough that it is not restraining growth.
There is no predetermined path for rates.
Any time you are changing direction, it is always a difficult decision.
Inflation is looking less likely to be well contained.
Uncertainty over the economy is hanging over the housing market.
Borrowing rates are weighing on the housing market.
We debated a hold and an increase; we always do that.
This section below was published at 13:45 GMT to cover the Bank of Canada's policy announcements and the initial market reaction.
The Bank of Canada (BoC) hiked its policy rate by 25 basis points (bps) to 2.50% on Wednesday, in line with market expectations. Attention now shifts to Governor Tiff Macklem's press conference at 14:30 GMT, where investors will be looking for additional details on the decision and any clues about the future path of monetary policy.
BoC policy statement key highlights
There could be a need to increase rates again.
Given uncertainties, the Governing Council agreed to proceed carefully.
The combination of higher-for-longer energy prices and increased pass-through adds to the persistence of inflation in the projection.
While businesses have largely absorbed higher input costs so far, Bank surveys suggest cost pass-through will increase over the next year.
Rates were raised to reduce the risk that continuing high energy prices spread broadly to prices of other goods and services.
Longer-term inflation expectations remain well anchored, while a broad set of indicators continues to point to some excess supply in the economy.
The growth forecast is subject to considerable uncertainty, particularly regarding trade ties with the US.
Market reaction
The Canadian Dollar (CAD) trades with modest gains vs. the Greenback on Wednesday, prompting USD/CAD to hover around the 1.4050 region in the wake of the central bank’s interest rate decision.
Canadian Dollar Price Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.11% | 0.08% | 0.11% | -0.09% | -0.13% | 1.15% | 0.12% | |
| EUR | 0.11% | 0.19% | 0.23% | 0.02% | -0.02% | 1.26% | 0.23% | |
| GBP | -0.08% | -0.19% | 0.04% | -0.17% | -0.19% | 1.07% | 0.04% | |
| JPY | -0.11% | -0.23% | -0.04% | -0.21% | -0.24% | 1.03% | -0.01% | |
| CAD | 0.09% | -0.02% | 0.17% | 0.21% | -0.04% | 1.24% | 0.21% | |
| AUD | 0.13% | 0.02% | 0.19% | 0.24% | 0.04% | 1.29% | 0.26% | |
| NZD | -1.15% | -1.26% | -1.07% | -1.03% | -1.24% | -1.29% | -1.01% | |
| CHF | -0.12% | -0.23% | -0.04% | 0.00% | -0.21% | -0.26% | 1.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
This section below was published as a preview of the Bank of Canada rate decision at 08:30 GMT.
- The Bank of Canada is expected to raise interest rates by 25 basis points to 2.50% on Wednesday.
- Canadian employment fell sharply in September, complicating the case for tighter monetary policy.
- Investors will scrutinize the central bank's guidance for clues about further rate increases.
The Bank of Canada (BoC) is expected to raise its benchmark interest rate by 25 basis points to 2.50% on Wednesday, as persistent inflation concerns put pressure on policymakers to tighten monetary policy despite growing signs of economic weakness.
According to a Reuters poll, 19 of 34 economists anticipate a rate hike, which would mark the central bank's first increase since July 2023. However, the decision remains uncertain as recent economic data highlight the challenges facing the Canadian economy.
Canada's Consumer Price Index (CPI) rose 3.1% YoY in September, compared with 3% in August, mainly driven by higher energy prices. Underlying inflation measures, however, eased, suggesting that broader price pressures remain relatively contained. BoC Governor Tiff Macklem has warned that prolonged increases in Oil prices could eventually spread to other goods and services.
Meanwhile, the Canadian labor market deteriorated sharply in September. Employment declined by 68.3K jobs, far below expectations of a 7K increase, following a loss of 41.7K jobs in August. The Unemployment Rate rose to 6.5% from 6.4%, reinforcing concerns about weakening domestic demand.
These conflicting signals have divided economists. BBH and Scotiabank expect a quarter-point rate hike, while TD Securities anticipates that the BoC will wait until December. Standard Chartered also favors keeping rates unchanged, citing subdued underlying inflation and economic weakness.
Beyond Wednesday's decision, investors will closely examine the BoC's updated economic projections and Governor Macklem's comments to assess whether policymakers are preparing for additional tightening or a more cautious approach.
When will the BoC release its monetary policy decision, and how could it affect USD/CAD?
The BoC will announce its monetary policy decision on Wednesday at 13:45 GMT, alongside its updated Monetary Policy Report. Governor Tiff Macklem's subsequent press conference at 14:30 GMT will offer further insights into the central bank's policy outlook.
A 25-basis-point rate hike accompanied by hawkish guidance could support the Canadian Dollar (CAD) and weigh on USD/CAD. Conversely, a hold rates decision or cautious guidance highlighting labor market weakness could undermine the Canadian Dollar and push USD/CAD higher.
In the four-hour chart, USD/CAD keeps a capped near-term tone as it holds just under the horizontal barrier at 1.4055 while remaining below the 200-period simple moving average (SMA) at 1.4108 and the 100-period SMA at 1.4153. The Relative Strength Index (14) at 54.9 has recovered into mildly positive territory, suggesting improving momentum, but price action is still constrained by these overhead averages, limiting upside follow-through for now.
On the topside, initial resistance is located at 1.4055, ahead of the 200-period SMA at 1.4108, with the 100-period SMA at 1.4153 and the nearby horizontal level at 1.4155 forming a broader supply zone higher up. On the downside, immediate support appears at 1.3969, with a deeper floor seen at 1.3910, and a break below this latter level would likely expose further bearish pressure in the short term.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
UOB’s Quek Ser Leang and Lee Sue Ann note AUD/USD has shifted into a slightly higher intraday range after touching 0.7055 in early Asia, with scope to test 0.7060 while major resistance at 0.7070 is seen out of reach and support at 0.7020. On a 1–3 week view, they warn that slowing momentum means a break below 0.6995 would negate prospects for 0.7070 coming into view.
Australian Dollar's gradual rise faces nearby resistance
"24-HOUR VIEW: We expected AUD to “range-trade between 0.7005 and 0.7035” yesterday. AUD then traded within a higher range of 0.7010/0.7040 and closed at 0.7025 (+0.12%). During the early Asian session today, AUD appeared to have popped to a high of 0.7055. Upward momentum is building, but not significantly. From here, there is scope for AUD to test 0.7060. The major resistance at 0.7070 is likely out of reach. Support is at 0.7020."
"1-3 WEEKS VIEW: Following our positive AUD view from the middle of last week, we highlighted yesterday (27 Oct, spot at 0.7020) that “upward momentum is starting to slow, and a break below 0.6995 (‘strong support’ level) would indicate that 0.7070 is not coming into view.” Although AUD popped to a high of 0.7055 earlier, it remains to be seen whether 0.7070 is coming into view."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/CAD holds steady as the Canadian Dollar struggles to gain traction after the BoC rate hike.
- The BoC raised interest rates by 25 bps to 2.50%, leaving the door open to further tightening.
- Attention shifts to the Fed’s interest rate announcement, with December hike expectations in focus.
USD/CAD is little changed during American trading hours on Wednesday as the Canadian Dollar (CAD) struggles to benefit from a widely anticipated Bank of Canada (BoC) interest rate hike. At the time of writing, the pair trades around 1.4050 after swinging in both directions in the immediate reaction to the decision.
The BoC raised its policy rate by 25 basis points (bps) to 2.50%. Governing Council said the increase was needed “to reduce the risk that continuing high energy prices spread broadly to the prices of other goods and services.”
The central bank also left the door open to additional hikes, saying, “There could be a need to increase the policy rate further, but given uncertainties, the Governing Council agreed to proceed carefully.” The BoC stressed that “the Bank remains committed to maintaining Canadians’ confidence in price stability.”
At the post-meeting press conference, BoC Governor Tiff Macklem said, “Hiking will limit pass-through of higher oil prices,” adding that inflation was “looking less likely to be well-contained.”
Macklem noted that the “policy rate, even with this hike, is low enough that it is not restraining growth.” However, he stressed that “there is no predetermined path for rates,” warning that “uncertainty in US trade and the Middle East could change outlook.”
The updated projections show a longer path back to the 2% inflation target. The BoC expects Consumer Price Index (CPI) inflation to rise to around 3.5% by year-end and average 3% in 2027, a percentage point above its July forecast, before easing to 2% in mid-2028.
Attention now turns to the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT. The US Dollar is holding firm ahead of the decision, with the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, hovering near two-week highs around 102.40.
Policymakers are widely expected to leave interest rates unchanged at 3.75%-4.00% after September’s 25-bps hike. With inflation risks still tilted to the upside, traders will closely watch Fed Chair Warsh’s remarks for clues on a December increase, which markets see as 85% likely, according to the CME FedWatch Tool.
A hawkish hold could support the US Dollar and push USD/CAD higher. A less hawkish tone, however, could prompt traders to scale back December rate hike bets and weigh on the Greenback.
Canadian Dollar Price Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | 0.10% | 0.14% | 0.01% | -0.08% | 1.25% | 0.12% | |
| EUR | 0.06% | 0.16% | 0.21% | 0.07% | -0.02% | 1.31% | 0.18% | |
| GBP | -0.10% | -0.16% | 0.04% | -0.09% | -0.19% | 1.15% | 0.00% | |
| JPY | -0.14% | -0.21% | -0.04% | -0.14% | -0.22% | 1.09% | -0.04% | |
| CAD | -0.01% | -0.07% | 0.09% | 0.14% | -0.09% | 1.23% | 0.11% | |
| AUD | 0.08% | 0.02% | 0.19% | 0.22% | 0.09% | 1.34% | 0.20% | |
| NZD | -1.25% | -1.31% | -1.15% | -1.09% | -1.23% | -1.34% | -1.11% | |
| CHF | -0.12% | -0.18% | -0.01% | 0.04% | -0.11% | -0.20% | 1.11% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Deutsche Bank’s Chief UK Economist Sanjay Raja judges Chancellor Healey’s United Kingdom (UK) Budget as broadly neutral for the public finances, with an estimated impact of GBP 1.3bn. The package limits tax hikes while boosting investment and easing cost of living pressures. Borrowing is projected to remain sticky and slightly above prior forecasts, leaving a sizeable fiscal hole and difficult consolidation choices ahead.
Neutral fiscal stance with rising risks
"The policy package introduced in the Budget is estimated to have a broadly neutral impact (GBP 1.3bn). But this wasn’t a dull Budget by any means."
"The Chancellor’s mantra heading into the Autumn Budget was to ‘do no harm’, and we think the Chancellor successfully met this objective. The biggest spending spree came via investment."
"To be sure, the tax burden remains on course to hit new post-war highs. Altogether, policy measures are projected to reduce borrowing by around GBP 10bn by the end of the forecast horizon."
"Indeed, public sector net borrowing is expected to stay sticky at 4.2% of GDP this fiscal year and is expected to fall to 3.4% of GDP. The medium-term outlook has borrowing sticking nearly 0.2pp above the Spring Statement projections with borrowing landing at 1.8% of GDP by 2031/32."
"Put simply, there will be a near GBP 25-40bn fiscal hole to fill in the new year. Questions around the backloaded nature of the projected fiscal consolidation will also raise concerns around the credibility of projected fiscal tightening."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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