10.12.202520:41:27UTC+00Canadian Dollar Strengthens to 12-Week Highs

The Canadian dollar strengthened, surpassing 1.38 against the US dollar, reaching its highest point in twelve weeks. This movement comes as markets adjust their expectations in light of a potential rate cut from the Federal Reserve, contrasted with the Bank of Canada's relatively hawkish position and stronger domestic economic data. Attention shifted to the Federal Reserve's guidance, which appeared more hawkish, with the committee planning only a single additional rate cut next year. However, Fed Chair Powell's comments suggested potential for further action, discussing the possibility of stopping cuts, or reducing rates "a little" or "more than a little." This ambiguity increased market speculation to a 68% probability of two or more cuts by 2026, thereby narrowing the yield differentials between the US and Canada. Meanwhile, the Bank of Canada maintained its policy rate at 2.25%, affirming that this stance is appropriate, especially following a surprising annualized GDP growth of 2.6% in the third quarter and a tightening labor market, with unemployment nearing 6.5%. This economic resilience diminishes the likelihood of imminent easing measures and supports the Canadian dollar.