FX.co ★ CAD Weakens After BoC Rate Hold

The Canadian dollar weakened to 1.37 per USD from a one-month high of 1.36 on April 27th, after the Bank of Canada opted to leave interest rates unchanged. The central bank kept its policy rate at 2.25% and indicated that it does not expect the recent spike in energy prices to unanchor inflation expectations, thereby curbing expectations of a rate hike this year. At the same time, the US dollar strengthened as investors increased their exposure to safe-haven assets amid persistent tensions between the US and Iran, with no clear signs of de-escalation. The US Federal Reserve is also scheduled to announce its latest interest rate decision today, with markets largely expecting a hold. This would align with the Bank of Canada’s cautious stance, as the Fed weighs the economic risks from the Iran conflict against the possibility of rising inflation.