The Canadian dollar appreciated to about 1.40 per USD in July, its strongest level in nearly a month, after the Bank of Canada left its benchmark interest rate unchanged at 2.25%, in line with market expectations. The central bank adopted a relatively hawkish stance, emphasizing that the economy is showing signs of improvement, with stronger medium-term growth now anticipated. It also signaled that inflation is likely to stay above earlier projections through 2026 before gradually trending lower.
Policymakers underscored ongoing risks from the conflict in the Middle East and from US trade policy, bolstering the view that interest rates are likely to stay on hold for an extended period. The loonie was further supported by a weaker US dollar, following US producer price data that came in below forecasts.
