USD/CAD FORECAST: RISKS TILTED HIGHER AS BOC OFFERS CAUTIOUS PAUSE
USD/CAD FORECAST: RISKS TILTED HIGHER AS BOC OFFERS CAUTIOUS PAUSE
Bank of Canada Pauses Rate Cuts Amid U.S. Tariff Uncertainty.
On April 16, 2025, the Bank of Canada (BoC) held its key policy interest rate steady at 2.75%, marking a pause after seven consecutive rate cuts initiated in June 2024.
The BoC cited ongoing uncertainty stemming from U.S. tariffs, which made traditional economic forecasting unreliable .
MUFG Bank analysts caution that the risk of a spike in USD/CAD is high, especially if U.S. 10-year yields continue to rise, potentially triggering an equity market correction .
The Canadian dollar strengthened on April 17, 2025, nearing a five-month high against the U.S. dollar, supported by rising oil prices and the BoC’s decision to halt its interest rate cuts .
BoC Governor Tiff Macklem emphasized a cautious and adaptable policy approach, indicating readiness to act decisively if economic data worsens .
Following the BoC's decision, the Canadian dollar appreciated, and bond yields modestly increased, reflecting market expectations of a more cautious monetary policy stance .
