The BoC hits peak rates; market expects the Fed to follow
The BoC raised its overnight rate by 25bps to 4.5%. This was as expected and is regarded as the current cycle's peak. The statement read that the central bank "expects to hold the policy rate at its current level."
The USD was sold off after the announcement, with the market expecting similar from the Fed next week.
Source: www.tradingview.com
The top shows the weekly chart of the USDCAD forex pair and the bottom chart shows the spread between the US and Canadian 2-year notes. From Q4, the USDCAD and the 2-year spread have been moving sideways (black arrows).
Source: www.tradingview.com
The 2-year notes are a good proxy for central bank policy. The correlation coefficient between the US and Canadian 2-year notes is a meaningful 83%. If this is to continue, a peak in Fed rates is imminent.
Russell Shor
Senior Market Strategist
Russell Shor is a Senior Market Strategist at FXCM, having been promoted to the role in 2025 in recognition of his depth of insight and consistent delivery of high-impact market analysis. He originally joined FXCM in October 2017 as a Senior Market Specialist.
Russell holds an Honours Degree in Economics from the University of South Africa, is a certified FMVA®, and a full member of the Society of Technical Analysts (UK). With over 20 years of experience in financial markets, his work is renowned for its clarity, precision, and strategic value across asset classes.
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