USD/CAD is trading near recent lows around 1.3765 following the Bank of Canada’s (BOC) decision to hold its policy rate at 2.25%. With the BOC emphasizing a cautious outlook and market expectations pricing a modest 25bps hike over the next year, the pair is expected to gradually edge lower toward 1.3500–1.3600, BBH FX analysts report.

BOC holds policy rate at 2.25%, signals caution

"USD/CAD is heavy near recent lows around 1.3765. At last week’s meeting, the BOC kept the policy rate unchanged at 2.25% as expected."

"The BOC emphasized again that it 'sees the current policy rate at about the right level to keep inflation close to 2%'. The BOC leaned slightly against market expectations for rate hikes cautioning that 'uncertainty remains elevated'. Still, the swaps curve implies a 25bps rate increase to 2.50% over the next twelve months."

"We expect USD/CAD to edge lower and stabilize between 1.3500-1.3600."

Source: Fxstreet