Forex News
- EUR/USD edges lower as the Greenback stages a rebound ahead of the Fed interest rate decision.
- Markets await Chair Powell’s guidance as expectations remain centered on two rate cuts later this year.
- ECB officials flag risks from Euro strength and its impact on monetary policy.
The Euro (EUR) edges lower against the US Dollar (USD) on Wednesday as the Greenback attempts a modest rebound ahead of the Federal Reserve’s interest rate decision due at 19:00 GMT. At the time of writing, EUR/USD is trading around 1.1935, easing after briefly climbing above the 1.2000 mark, its highest level since June 2021.
The Greenback found some support after remarks from US officials helped calm markets following a sharp bout of Dollar selling. US Treasury Secretary Scott Bessent reaffirmed that the United States continues to pursue a “strong dollar” policy, adding that Washington is “absolutely not” intervening in USD/JPY at present.
The remarks followed comments from US President Donald Trump on Tuesday, who downplayed the recent slide in the US Dollar, saying the currency should “just seek its own level, which is the fair thing to do.”
On the monetary policy front, the Fed is widely expected to keep interest rates unchanged in the 3.75%-3.50% range, after delivering three consecutive 25-basis-point (bps) cuts last year as downside risks to the labor market increased.
Since the December meeting, US labor market data have remained broadly resilient, while inflation has continued to moderate, though it remains above the Fed’s 2% target.
This backdrop leaves policymakers in wait-and-see mode, with markets looking to Chair Jerome Powell for guidance on the timing and pace of any further easing, as expectations remain centered around two rate cuts later this year.
Meanwhile, attention is also focused on Fed leadership. President Donald Trump is expected to announce his pick for the next Fed Chair, though the timing remains uncertain. Potential candidates reportedly include BlackRock’s Chief Bond Investment Manager Rick Rieder, current Fed Governor Christopher Waller and former Fed Governor Kevin Warsh.
Markets remain wary that Trump’s choice could steer the central bank toward a more dovish policy path, following his repeated criticism of Chair Powell for not cutting interest rates more aggressively.
Elsewhere, the Euro’s recent appreciation has also drawn attention from European Central Bank (ECB) officials. ECB Governing Council member François Villeroy de Galhau said the central bank is “closely monitoring this appreciation of the euro and its possible consequences in terms of lower inflation,” adding that it is “one of the factors that will guide our monetary policy and our decisions on interest rates over the coming months.”
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.79% | 0.36% | 0.78% | -0.01% | 0.09% | 0.15% | 0.99% | |
| EUR | -0.79% | -0.43% | -0.04% | -0.80% | -0.69% | -0.64% | 0.20% | |
| GBP | -0.36% | 0.43% | 0.40% | -0.37% | -0.27% | -0.21% | 0.63% | |
| JPY | -0.78% | 0.04% | -0.40% | -0.78% | -0.68% | -0.63% | 0.21% | |
| CAD | 0.00% | 0.80% | 0.37% | 0.78% | 0.10% | 0.16% | 1.00% | |
| AUD | -0.09% | 0.69% | 0.27% | 0.68% | -0.10% | 0.05% | 0.91% | |
| NZD | -0.15% | 0.64% | 0.21% | 0.63% | -0.16% | -0.05% | 0.83% | |
| CHF | -0.99% | -0.20% | -0.63% | -0.21% | -1.00% | -0.91% | -0.83% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
- The Dow Jones shuffled in place as investors wait for the Fed’s latest rate call.
- Interest rates are broadly expected to remain unchanged, but markets await rhetoric shifts.
- Chip stocks gained ground, bolstering other indexes to all-new record highs.
The Dow Jones Industrial Average (DJIA) churned in the midrange as investors await the latest interest rate decision from the Federal Reserve (Fed). Some pockets of market momentum struck in the chip sector, driving the Standard & Poor’s 500 index to fresh all-time highs, before retreating ahead of the Fed’s first rate call of 2026.
The Fed is functionally locked into a no-change rate set on Wednesday. Nobody at the Fed or in the markets expects interest rates to move from their 3.5-3.75% range for January. Instead, investors are looking ahead to see whether any Fed officials will signal a faster pace of rate cuts than the Federal Open Market Committee (FOMC) expects.
According to the Fed’s own dot plot of interest rate expectations, Fed officials see a single rate cut in 2026 and one more in 2027. According to rate futures markets, rate traders are pricing in at least two rate cuts by the end of 2026.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
- The US Dollar stages a partial recovery ahead of the Federal Reserve’s monetary policy decision.
- Remarks from the US President in favor of a weaker US Dollar continue to weigh on sentiment.
- The Japanese Yen remains supported by expectations of monetary tightening in Japan.
USD/JPY trades around 153.60 on Wednesday at the time of writing, up 0.80% on the day, as the US Dollar (USD) attempts to stabilize after hitting a four-year low earlier in the week. The rebound comes as investors remain cautious ahead of the Federal Reserve (Fed) policy decision expected later in the day.
The US Dollar came under heavy pressure on Tuesday following comments from US President Donald Trump, who said that a weaker US Dollar was “a good thing” and that the currency was simply seeking its own equilibrium level. These remarks reinforced concerns about political tolerance for a softer currency, adding to the pressure on the Greenback, which is already weighed down by expectations of future rate cuts.
Markets widely expect the Fed to keep interest rates unchanged in the 3.50%-3.75% range. Money markets assign a chance close to 95% to a hold, following three consecutive 25-basis-point cuts delivered last year. The focus will be firmly on Fed Chair Jerome Powell’s press conference, as his remarks are expected to provide guidance on the future path of interest rates. Several major banks believe the central bank will emphasize a wait-and-see approach, even as markets continue to price in two rate cuts later this year.
Since the last Fed meeting, US macroeconomic data have broadly supported the view that the central bank can afford to remain patient. Inflation is easing only gradually, while labor market conditions remain relatively resilient, reducing the urgency for further monetary easing. However, any signal of a prolonged pause could provide additional support to the US Dollar.
On the Japanese side, the Japanese Yen (JPY) continues to draw structural support from the evolving monetary policy outlook. Minutes from the Bank of Japan’s (BoJ) December meeting showed that policymakers are increasingly confident in the sustainability of wage growth and underlying inflation, justifying a gradual continuation of monetary tightening. This backdrop helps limit Japanese Yen losses, despite persistent concerns over Japan’s fiscal position and political uncertainty ahead of the snap election scheduled for February 8.
Concerns surrounding government spending plans and tax cuts in Japan continue to weigh on the domestic currency, alongside a generally positive risk environment. These factors help underpin USD/JPY in the near term, although the growing divergence between a more hawkish Bank of Japan and a Federal Reserve that may lean toward rate cuts could, over the medium term, restore some appeal to the Japanese Yen.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.80% | 0.43% | 0.81% | -0.02% | 0.21% | 0.23% | 0.97% | |
| EUR | -0.80% | -0.38% | -0.02% | -0.83% | -0.59% | -0.57% | 0.16% | |
| GBP | -0.43% | 0.38% | 0.38% | -0.45% | -0.22% | -0.20% | 0.54% | |
| JPY | -0.81% | 0.02% | -0.38% | -0.81% | -0.59% | -0.57% | 0.17% | |
| CAD | 0.02% | 0.83% | 0.45% | 0.81% | 0.23% | 0.25% | 0.99% | |
| AUD | -0.21% | 0.59% | 0.22% | 0.59% | -0.23% | 0.02% | 0.75% | |
| NZD | -0.23% | 0.57% | 0.20% | 0.57% | -0.25% | -0.02% | 0.73% | |
| CHF | -0.97% | -0.16% | -0.54% | -0.17% | -0.99% | -0.75% | -0.73% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This is a summary of the main highlights following the BoC’s interest rate decision earlier on Wednesday.
- The Bank of Canada held its policy rate at 2.25%, as expected, reinforcing a cautious, wait-and-see stance amid lingering uncertainty.
- Beyond the near term, the growth outlook remains soft: 2026 GDP remains at 1.1%, with a sharp downgrade to flat growth in Q4 activity.
- Inflation projections edged lower, with CPI now seen averaging 2.0% in 2026, while estimates for the neutral rate were left unchanged at 2.25%–3.25%.
- Governor Tiff Macklem struck a sober tone on trade, warning that adjustment to US tariffs will be long-lasting and that the era of open, rules-based trade with the US is effectively over.
- Macklem highlighted the increasing geopolitical risks, acknowledging the dent in the US Dollar's safe-haven role and emphasising the crucial need to maintain the Federal Reserve's independence.
Bank of Canada FAQs
The Bank of Canada (BoC), based in Ottawa, is the institution that sets interest rates and manages monetary policy for Canada. It does so at eight scheduled meetings a year and ad hoc emergency meetings that are held as required. The BoC primary mandate is to maintain price stability, which means keeping inflation at between 1-3%. Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Canadian Dollar (CAD) and vice versa. Other tools used include quantitative easing and tightening.
In extreme situations, the Bank of Canada can enact a policy tool called Quantitative Easing. QE is the process by which the BoC prints Canadian Dollars for the purpose of buying assets – usually government or corporate bonds – from financial institutions. QE usually results in a weaker CAD. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The Bank of Canada used the measure during the Great Financial Crisis of 2009-11 when credit froze after banks lost faith in each other’s ability to repay debts.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Bank of Canada purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the BoC stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Canadian Dollar.
US Treasury Secretary Scott Bessent said on Wednesday that rate decisions remain firmly in the Federal Reserve's (Fed) domain and expressed hope that policymakers would keep an open mind.
Key Quotes
Miran’s term could continue.
It is up to the Fed on rates.
I hope they will have an open mind.
Have not narrowed or expanded chairman candidates.
I spoke with Trump on the Fed chair on Tuesday.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- USD/CAD holds steady after the Bank of Canada keeps rates unchanged at 2.25%.
- US Dollar rebounds modestly after comments from US officials help steady sentiment.
- Focus shifts to the Fed’s interest rate decision and Chair Jerome Powell’s guidance.
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.
Bank of Canada FAQs
The Bank of Canada (BoC), based in Ottawa, is the institution that sets interest rates and manages monetary policy for Canada. It does so at eight scheduled meetings a year and ad hoc emergency meetings that are held as required. The BoC primary mandate is to maintain price stability, which means keeping inflation at between 1-3%. Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Canadian Dollar (CAD) and vice versa. Other tools used include quantitative easing and tightening.
In extreme situations, the Bank of Canada can enact a policy tool called Quantitative Easing. QE is the process by which the BoC prints Canadian Dollars for the purpose of buying assets – usually government or corporate bonds – from financial institutions. QE usually results in a weaker CAD. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The Bank of Canada used the measure during the Great Financial Crisis of 2009-11 when credit froze after banks lost faith in each other’s ability to repay debts.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Bank of Canada purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the BoC stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Canadian Dollar.
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 keep the policy rate on hold at 2.25%.
BoC press conference key highlights
Canadian firms’ adjustment to US tariffs will last at least through end-2027.
The economy works less efficiently (with US tariffs). We´d be better off if we adjust.
Recent USD weakness is largely driven by geopolitical events.
People avoid further exposure to the US Dollar.
The safe haven role of the US dollar has been dented.
The Governing Council felt it was hard to assign probability to risks to the outlook.
The era of open, rules-based trade with the US is over.
Asked about the Federal Reserve:
We all need the Fed to work well.
A reduction in the Fed’s independence would particularly affect us.
Independence gives central banks space to take difficult decisions to benefit the economy.
The threat to the Fed's independence is contributing to a sense of economic uncertainty.
Powell is doing a good job.
I hope the Fed retains its independence.
This section below was published at 14:45 GMT to cover the Bank of Canada's policy announcements and the initial market reaction.
The Bank of Canada (BoC) kept its policy rate on hold at 2.25% on Wednesday, as expected. Attention now shifts to Governor Tiff Macklem’s press conference at 15:30 GMT, where markets will be listening closely for more colour on today’s decision and what might come next.
BoC policy statement key highlights
The Bank of Canada keeps the 2026 growth forecast at 1.1% and sees 1.5% growth in 2027 (vs 1.6% in the October Monetary Policy Report).
Says 2025 growth was most likely 1.7% (up from 1.2% in Oct).
Inflation is to average 2.0% in 2026 (vs. 2.1% forecast in Oct.), 2.1% in 2027 (unchanged).
Annualised Q4 growth is seen at 0.0% (vs 1.0% in Oct); Q1 2026 is predicted to be 1.8%.
The Q4 output gap is estimated in the range of -1.5% to -0.5%, unchanged from October.
Potential output growth in 2026 is seen at 1.0% (unchanged) and 1.0% in 2027 (vs 1.3%).
Potential output growth in 2025 was revised up to 2.3% from 1.6% in Oct., mainly due to historical GDP revisions.
The nominal neutral interest rate is assumed to be in a range of 2.25% to 3.25%, unchanged from October.
Market reaction
The Canadian Dollar (CAD) trades with acceptable gains on Wednesday, motivating USD/CAD to add to Tuesday’s losses and flirt with the area of 2025 lows around 1.3540 in the wake of the BoC’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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.46% | 0.28% | 0.23% | -0.29% | -0.02% | 0.04% | 0.57% | |
| EUR | -0.46% | -0.18% | -0.24% | -0.75% | -0.48% | -0.40% | 0.11% | |
| GBP | -0.28% | 0.18% | -0.04% | -0.53% | -0.30% | -0.24% | 0.29% | |
| JPY | -0.23% | 0.24% | 0.04% | -0.51% | -0.24% | -0.19% | 0.34% | |
| CAD | 0.29% | 0.75% | 0.53% | 0.51% | 0.27% | 0.33% | 0.86% | |
| AUD | 0.02% | 0.48% | 0.30% | 0.24% | -0.27% | 0.06% | 0.58% | |
| NZD | -0.04% | 0.40% | 0.24% | 0.19% | -0.33% | -0.06% | 0.52% | |
| CHF | -0.57% | -0.11% | -0.29% | -0.34% | -0.86% | -0.58% | -0.52% |
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's (BoC) monetary policy announcements at 10:00 GMT.
- The Bank of Canada is expected to keep its interest rate at 2.25%.
- The Canadian Dollar remains firm, dragging USD/CAD to yearly lows.
- Markets pencil in around 10 bps of hiking by the BoC this year.
The Bank of Canada (BoC) is widely expected to leave its benchmark rate unchanged at 2.25% at Wednesday’s meeting, extending the pause it signalled back in December.
At its last decision, the central bank made clear it sees policy as roughly where it needs to be to keep inflation close to the 2% target, so long as the economy behaves as expected. Still, officials were keen to underline that they’re not locked in and stand ready to respond if the outlook deteriorates or inflation risks re-emerge.
On inflation, the message remains cautiously reassuring. Headline CPI is projected to hover near the target as spare capacity in the economy helps offset cost pressures tied to trade reconfiguration. Even so, underlying inflation is still running a little hot, suggesting the disinflation process isn’t complete.
The growth picture is also uneven: Q4 GDP is expected to come in soft, with firmer domestic demand likely to be outweighed by a drag from net exports. That follows a surprisingly strong Q3, which the BoC has largely put down to trade-related volatility rather than a genuine pickup in momentum. The labour market offers a slightly brighter note, with early signs of improvement reinforcing the Bank’s wait-and-see approach.
Inflation, however, remains the key watchpoint after the headline CPI edged up to 2.4% YoY in December, while core inflation eased to 2.8% YoY. The bank’s preferred measures, CPI-Common, Trimmed and Median, also ticked lower, but at 2.8%, 2.7% and 2.5% respectively, they remain comfortably above target.
Previewing the BoC’s interest rate decision, analysts at the National Bank of Canada (NBC) noted, “The Bank of Canada is set to leave its overnight target unchanged at 2.25%, a decision widely expected by forecasters and OIS markets. This would mark the second consecutive hold after policymakers declared in October that policy is at ‘about the right level’ to keep inflation near target and support the economy’s transition”.
When will the BoC release its monetary policy decision, and how could it affect USD/CAD?
The Bank of Canada will announce its policy decision on Wednesday at 14:45 GMT alongside the Monetary Policy Report (MPR), followed by a press conference with Governor Tiff Macklem at 15:30 GMT.
Markets anticipate the central bank will maintain its current stance, with a projected tightening of approximately 10 basis points by the end of 2026.
Pablo Piovano, Senior Analyst at FXStreet, points out that the CAD has been appreciating steadily against the Greenback since its yearly lows past the 1.3900 barrier recorded earlier in the month. He adds: “Indeed, USD/CAD has recently broken below the 1.3700 support to hit new 2026 lows, exposing a potential test of the December 2025 floor at 1.3642 (December 26). South from here sits the weekly trought at 1.3575 (July 23), ahead of the July 2025 base at 1.3556 (July 3) and the 2025 bottom at 1.3538 (June 16).”
From here, Piovano says a return of bullish momentum could prompt USD/CAD to initially reclaim its key 200-day SMA at 1.3833 prior to the 2026 ceiling at 1.3928 (January 16). Up from here comes the key 1.4000 threshold seconded by the November top at 1.4140 (November 5).
“Momentum favours extra declines,” he adds, noting that the Relative Strength Index (RSI) approaches the 33 level and the Average Directional Index (ADX) near 27 is indicative of a pretty firm trend.
Bank of Canada FAQs
The Bank of Canada (BoC), based in Ottawa, is the institution that sets interest rates and manages monetary policy for Canada. It does so at eight scheduled meetings a year and ad hoc emergency meetings that are held as required. The BoC primary mandate is to maintain price stability, which means keeping inflation at between 1-3%. Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Canadian Dollar (CAD) and vice versa. Other tools used include quantitative easing and tightening.
In extreme situations, the Bank of Canada can enact a policy tool called Quantitative Easing. QE is the process by which the BoC prints Canadian Dollars for the purpose of buying assets – usually government or corporate bonds – from financial institutions. QE usually results in a weaker CAD. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The Bank of Canada used the measure during the Great Financial Crisis of 2009-11 when credit froze after banks lost faith in each other’s ability to repay debts.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Bank of Canada purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the BoC stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Canadian Dollar.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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