USD/CAD yawns after BoC surprise

Bank of Canada surprises with 50 bp hike

The Bank of Canada delivered a second straight 50-bp hike on Wednesday, which brought the cash rate to 4.25%. The markets had been split on whether the BoC would raise by 50 bp or 25 bp, pricing in 33 bp ahead of the decision. The move didn’t have an effect on the Canadian dollar, which closed the day unchanged.

The BoC decided on the larger rate move due to strong growth, a tight labour market and high inflation. The rate statement noted that inflation is “still too high” but added that core inflation has been falling, which may indicate that inflationary pressures are “losing momentum.”

What’s next for the BoC? The rate statement contained a significant hint that the Bank may be close to winding up the current tightening cycle, stating that the BoC was “considering whether the policy rate needs to rise further”. This was in contrast to the October meeting when the BoC stated it “expects that the policy interest rate will need to rise further.” This appears to be a dovish shift, in that additional rate hikes are longer a given. The BoC meets next in late January, and the Bank’s rate decision could again go down to the wire, only this time it will be a choice between a 25 bp increase and a pause. Policy makers have some time to gauge the effect of high rates on the domestic economy and they will also be keeping a close eye on developments in Europe, China and the US.

Ahead of next week’s CPI report, the US releases PPI and UoM Inflation Expectations on Friday. There are signs that inflation is weakening, and if this is reflected in Friday’s data, the financial markets could get a boost and the US dollar could lose ground, a scenario we’ve become accustomed to seeing whenever inflation underperforms.


USD/CAD Technical

  • There is weak resistance at 1.3681. The next resistance line is 1.3766
  • USD/CAD has support at 1.3596 and 1.3484

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.