USD/CAD is consolidating in a tight range below 1.3800 during Thursday’s Asian session, hovering near its weakest level since October 22. The broader fundamental landscape continues to favor sellers, suggesting that the path of least resistance for the pair remains biased to the downside.
The Canadian dollar is outperforming against a broadly softer USD following the Bank of Canada’s hawkish tilt, which strongly signaled that its rate-cutting cycle has concluded. This diverges notably from expectations for additional easing by the Federal Reserve and reinforces the bearish outlook for USD/CAD.
The BoC held its benchmark rate at 2.25% on Wednesday, citing resilient third-quarter economic data and signs that the Canadian economy has absorbed recent trade-related pressures. Governor Tiff Macklem added that current policy settings are well positioned to support the economy through its structural transition.
CAD support boosted by policy divergence and firmer oil
Expectations are also building that the BoC could shift toward a rate hike in the coming months, a view that offsets geopolitical uncertainty stemming from US President Donald Trump’s renewed tariff threats on agricultural imports, including Canadian fertilizer. At the same time, a rebound in crude oil prices – key to Canada’s export profile—is lending further support to the loonie and acting as an additional drag on USD/CAD.
Fed easing outlook weighs on USD
Meanwhile, the Fed’s latest 25 bps rate cut and its projection of just one more cut in 2026 have kept USD on the defensive. Markets continue to price in the possibility of two more reductions next year after Chair Jerome Powell warned of rising downside risks in the labor market and emphasized that policymakers do not wish to hinder job creation. Combined with a broadly positive risk environment, these factors are reducing the USD’s safe-haven appeal and adding to bearish pressure on the pair.
Data ahead
Traders now turn their attention to upcoming Trade Balance figures from both the US and Canada. These readings, alongside movements in the USD and crude oil markets, are expected to provide fresh intraday direction for USD/CAD during the North American session.
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