USDCAD appreciates as Bank of Canada keeps rates steady
Source: www.tradingview.com
The Bank of Canada kept rates at 4.5%. This was in line with market expectations and its previous communication. By the middle of the year, the BoC expects inflation to moderate to 3%. It will continue to monitor the economy and is prepared to increase rates if needed.
The 2-year note is considered a good proxy for central bank policy. The spread between the Canadian and US 2-year notes (top chart) is insightful. It has charted a higher trough (HT) followed by a higher peak (HP). I.e., the spread is trending up in favour of the US 2-year note. This is not surprising. There is a stark contrast between the Fed and the BoC in terms of policy. BoC communication has about confirmed rates have peaked in Canada, whilst the Fed remains on an aggressive tightening policy in its efforts to curtail inflation.
USDCAD (bottom chart) traded in a sideway symmetrical triangle pattern from October 2022 to mid-February this year. However, the data coming out of the US in February has been much hotter than anticipated, forcing the Fed to become more aggressive in its tightening bias.
Given this, and the resulting spread increase, the USDCAD has broken up and out of the consolidation pattern. A relative difference in tone between the two central banks, and the uptrend in the 2-year note spread means that the USDCAD has a tailwind behind it.
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.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.