USD/CAD moves higher to near 1.3750 with focus on BoC monetary policy

USD/CAD gains to near 1.3750 with BoC policy in focus.
The Canadian Dollar weakens due to multiple headwinds.
The US Dollar edges lower ahead of a busy US data week.

Sagar Dua FXStreet

The USD/CAD pair rises to near 1.3750 in Monday’s European after recovering its intraday losses. The Loonie asset strengthens as the Canadian Dollar weakens due to a sharp correction in oil prices and uncertainty ahead of the Bank of Canada’s (BoC) interest-rate policy, scheduled for Wednesday.

West Texas Intermediate (WTI), futures on NYMEX, declines to near $78.30, amid uncertainty over China’s economic outlook. Investors worry that the Chinese economy struggles for a firm-footing due to weak domestic demand. The economy grew at a slower-than-expected pace in the second quarter this year.

It is worth noting that Canada is the leading supplier of Oil to the United States (US) and higher Oil prices support the Canadian Dollar.

On the monetary policy front, investors expect that the BoC will deliver subsequent rate cuts on Wednesday. The BoC is expected to cut interest rates again by 25 basis points (bps) to 4.5% due to easing price pressures and cooling labor market conditions.

Meanwhile, the US Dollar (USD) has corrected gradually as the withdrawal of the re-election bid by US President Joe Biden has induced political uncertainty. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slides to near 104.20.

This week, the US Dollar will be guided by a slew of US economic data, which will provide cues about when the Federal Reserve (Fed) will start lowering interest rates this year.

Economic Indicator

BoC Interest Rate Decision

The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.

EUR/USD climbs to daily highs near 1.1820

EUR/USD now picks up pace and advances to the area of daily peaks north of the 1.1800 barrier at the end of the week. The pair’s decent move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the mild offered stance in the US Dollar.

GBP/USD trims losses, retests 1.3460

After briefly challenging its key 200-day SMA near 1.3440, GBP/USD now manages to regain some balance and revisit the 1.3460 zone on Friday. Cable’s pullback comes as the selling pressure on the Greenback gathers traction, reigniting some recovery in the risk-linked space.

Gold flirts with four-week highs past $5,200

Gold extends its rebound, climbing for a third consecutive session and pushing back above the $5,200 mark per troy ounce on Friday. The move higher continues to draw support from lingering geopolitical tensions and the ongoing uncertainty surrounding US trade policy, both of which are keeping safe-haven demand firmly in play.

Bitcoin, Ethereum and Ripple consolidate with short-term cautious bullish bias

Bitcoin, Ethereum and Ripple are consolidating near key technical areas on Friday, showing mild signs of stabilization after recent volatility. BTC holds above $67,000 despite mild losses so far this week, while ETH hovers around $2,000 after a rejection near its upper consolidation boundary.

Changing the game: International implications of recent tariff developments

The Supreme Court ruling on International Emergency Economic Powers Act (IEEPA) tariffs provides limited relief for the rest of the world, with weighted average tariff rates modestly lower.

Starknet unveils strkBTC, shielded Bitcoin transactions on Ethereum Layer 2

Starknet, the Ethereum Layer 2 network developed by StarkWare, today announced strkBTC, a wrapped Bitcoin asset that introduces optional shielding while preserving full DeFi composability.